For Erdogan’s Istanbul Canal project, critics see a few winners Business and Economy News

Istanbul, Turkey – About 500 years ago, Sultan Suleiman the Magnificent thought of building a ship’s canal to bypass the Bosphorus. With the latest and most ambitious of Turkey’s “megaprojects” launched under President Recep Tayyip Erdogan, that dream is now close to realization.

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

According to government estimates, with an estimated seven years of construction time and a price tag of 9. 9.3 billion to .6 14.6 billion, the Istanbul Canal has been created by its supporters as a smart investment that will pay off in terms of shipping revenue and reduce traffic on Bosphorus Street.

But there are plenty of skeptics. Geopolitically, The project has cast doubt on Turkey’s commitment In the international treaty that operates shipping in the Bosphorus and Dardanelles Stress.

It was also criticized as another mega project by Erdogan that could endanger the environment, leave the state out of pocket and make the Turkish economy more risky in changing the attitude of global investors, who depend on foreign financing.

‘Crazy Project’

After Erdogan announced a $ 200 billion, 10-year building spree since 2013, the government is the latest in a series of infrastructural projects since 201st Istanbul Canal.

Included in the list of mega projects completed so far One of the largest airports in the world, Rail and road tunnels under the Bosphorus, and a suspension bridge connecting Europe with Asia, identified as the world’s largest country.

Another intercontinental bridge at Dardanelles is scheduled to be completed next year.

Dozens of low-cost schemes have also been built to such an extent that any new expansion of motorway openings, or without an airport or train line, is cut short by a week.

The Istanbul Canal, however, can accept them all well. When he first proposed in 2011 that it was identified as a “crazy project” by Erdogan, the canal would be a 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 ceremony of Istanbul’s new airport on October 29, 2018 in Istanbul, Turkey. [File: Murad Sezer/Reuters]

The government has encouraged the canal to reduce the number of ships using the Bosphorus, one of the busiest and busiest waterways in the world. It also highlights the amount of money that can be collected from ships passing through the canal.

Critics, however, have noted that Bosphorus traffic has declined significantly in recent years, especially as new pipelines make shipping oil and gas relatively less efficient.

According to the Turkish Ministry of Transport, between 2008 and 2018, the number of ships in the Bosphorus dropped from 54,400 to 41,100 a year. According to the Turkish Coast Guard, the number of shipwrecks has dropped by a third since 2003.

Some are also questioning whether the canal will meet Turkey’s expectations to the extent expected by the government, noting that ships can now pass through the Bosphorus for a nominal fee and that there will be some incentive to pay for the canal’s use.

Moreover, previous mega projects have left the public out of pocket when they failed to reach the expected revenue ambitious predictions, leaving the state to meet the guarantees of the companies under the build-operate-transfer agreement.

The government paid more than 15 515 million in 2019 to the operator of the third Bosphorus Bridge, which opened five years ago, to reduce the expected toll revenue.

Green Party co-spokesman Corey Dogan Urbarli said the same could happen in the case of the Istanbul Canal.

He told Al Jazeera: “Taxpayers will compensate us for ships that do not travel through the canal under the guarantee.”

The Yavuz Sultan Selim Bridge, also known as the Third Bosphorus Bridge, connecting European and Asian parts of Istanbul, Turkey. [File: Osman Orsal/Reuters]

Urbarli added that the canal route would destroy Istanbul’s water-supplying lakes and rivers and pose a threat to marine and freshwater ecosystems.

Gulsin Ozkan, a professor of finance at King’s College London, said the cost-benefit analysis of such projects was “financially and environmentally” exclusive.

“Most of Turkey’s mega-projects carry environmental costs as they are consistently pushed forward by experts, environmentalists and professional bodies as neglected by the government by significant unions of engineers and chambers of commerce and architects,” he told Al Jazeera.

‘Lucky few’

Such replicas on the government canal pitch have speculated that the private sector contractors, the most beneficiaries of the mega project, will build a “new town” on 8,300 hectares (20,510 acres) around the proposed canal.

Shares of real estate firms rose 8.65 percent on the Istanbul Exchange after the canal zoning plan was approved on March 27.

Haluk Levant, a professor in the Department of Economics at the University of Istanbul Bilgi, described the canal project as “the first phase of a calendar project” that could increase inequality.

He told Al Jazeera that “the model of growth in Turkey for a long time has been based on rent monetization,” and as a result, social problems such as unemployment and income inequality have deepened. “

“The important thing is the city that will be built around the canal and there will be revenue from this city,” Urverly said. “The agricultural land that was acquired cheaply will suddenly turn into a residential area and we will keep an eye on some of the lucky ones to become more prosperous.”

Committed to the Montreux Convention

The canal also expressed concern over Ankara’s commitment to the Montroux Convention, which gives Turkey control over the Bosphorus and Dardanelles and guarantees access to civilian ships in times of peace while restricting warships.

A group of retired Turkish admirals who warned against withdrawing from the 1936 Montroux Convention He was arrested last week.

To comment on the canal’s criticism, the president’s office referred to Al Jazeera in a section of its website citing the government’s argument in favor of the proposal and Erdogan’s remarks on Wednesday.

In a question-and-answer session with the youth, Erdogan said the canal “has nothing to do with Montroux” and would allow Turkey to “establish our own independence, our own sovereignty fully.”

Most lawyers agree that even if the canal goes beyond the scope of the convention, the treaty could be threatened, raising the possibility of militarization in the Black Sea, as well as raising questions about how to control Bosphorus traffic.

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

Growth and weakness

Under Erdogan’s Justice and Development Party’s 19-year rule, Turkey has enjoyed long-term economic expansion, much of which was encouraged by a construction gum driven by easy credit to foreigners.

But in recent years the picture has turned dark, with Turkey’s reliance on external financing increasing whenever global investors’ sentiments turn against the lira.

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

Inflation is currently stagnantly doubling, from 16.2 percent on an annual basis last month. Unemployment is also high, with 13.4 percent registered in February.

Lira’s plight was exacerbated last month when Erdogan abruptly fired Turkey’s central bank chief Nassi Agbal – who raised interest rates in an effort to control inflation – and who did so to restore some of the bank’s credibility with investors. Agal was in office just four months ago, when Erdogan showed him the door, the third central bank chief fired by the president in the past two years.

Because of Erdogan’s belief that high interest rates feed inflation, many have suggested Agabal lose his job – a view that clashes with economic orthodoxy because higher interest rates increase the cost of borrowing and are therefore seen as a fight against inflation.

A banner reads ‘Where’s the 128 billion?’ The main opposition Republican People’s Party (CHP) hangs in the Beyoglu district office in Istanbul, Turkey. [File: Dilara Senkaya/Reuters]

Agal was also asked to investigate how Turkey spent some of it মু 128 billion in foreign exchange reserves He resigned as finance minister in November to defend the lira, led by Erdogan’s son-in-law Berat Albayrak.

During the first meeting on Thursday, the bank kept its benchmark interest rate unchanged and under the supervision of the newly established central bank chief Sahap Kavisioglu. Has promised to maintain a strong monetary policy.

The lira slipped against the dollar from 6.05 to 6.15 in the news.

Lira weakness is not only felt by Turkish customers. Every time the currency depreciates against the dollar, Turkish companies are looking to increase their servicing costs in foreign currency, especially young companies that are indebted to the dollar.

This result has cast a shadow over showpiece construction projects, such as Istanbul’s new airport.

Infrastructural projects have previously boosted growth, but the existence of guarantees in foreign currency has often reduced their value to Turkey, which has been in operation for 25 years.

Losses such as the loss of the lira in recent years “immediately affect state guarantees for these large projects,” Ozkan said.

“State guarantees also extend to turnover guarantees that are set at unrealistic levels in normal times, resulting in catastrophic consequences after the shutdown of economic activity during the COVID-19 epidemic.” “This is especially the case with Istanbul Airport, where most air routes have been closed since 2020.”

Weight said such deficits lead to “growing larger holes in the public finances”. Turkey’s public debt stands at about 208 billion, or about 40 percent of GDP by the end of 2020.

Istanbul Mayor Ekrem Imamoglu, who represents the main opposition party, was the main critic of the canal, describing it as “one of the biggest risks in the city’s entire history”.

He called for the money to be spent on public transport, water supply, social projects, education and earthquake protection.

“The Canal Istanbul project is like a big and risky surgery that no one would want to go unless absolutely necessary,” he said at a meeting last year. “We’re talking about a surgery that will cut through the city and basically damage its vital arrangements.”

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