Further afield: Contractors gain profits and valuable experience by doing work abroad

Even as Turkey gears up for a major series of investments in infrastructure, residential and commercial construction, its biggest companies are cutting their teeth in developing countries around the world. A host of contractors have been making a name for themselves internationally over the past several decades, working mainly in the Middle East and North Africa (MENA) region and the Commonwealth of Independent States. Data from the Turkish Contractors Association reveals that Turkish companies won $20.3bn in contracts in 2010 for 517 projects in 48 countries.

MAJOR PLAYERS: In fact, many of the largest Turkish contractors do most of their work overseas now. For example, the top Turkish companies listed in the 2011 ENR-225 Global Contractor Index, which ranks firms by their total revenues worldwide, were Polimeks, Renaissance Construction and GAMA. All three companies, each of which grossed more than $1.3bn in 2011, earned at least 90% of their revenue overseas.

In the past, two main reasons underlay the decision for most Turkish firms to go abroad. The first was the limited opportunities available in the domestic market versus the major infrastructure projects then being undertaken in Turkey’s neighbours. Mehmet Ali Neyzi, the CEO of STFA Construction Group, an international contracting firm founded in Turkey, told OBG, “STFA went to Libya in 1972 and Saudi Arabia in 1978, observing the need for development in the Middle East, which we saw as an opportunity.” The less intense competition for these contracts, particularly in specialised fields, was also a big draw.

BENEFITS: Contractors note that working abroad has led to the development of high quality and safety standards, particularly with so many contracts connected to the oil and gas industry. However, the standardisation required when working abroad can make it difficult to compete on price when contractors return to Turkey to bid on domestic projects. One risk faced by contractors working abroad is political instability, which was brought home by the fallout from the Libyan civil war of 2011. Turkish companies had contracts worth a total of $7.6bn there during the 2009-10 period, making Libya the number-two source of international revenue in 2010, behind Turkmenistan.

These projects abruptly stopped in 2011, but companies are eager to resume work. Turkey’s government has been proactive in this regard, offering to subsidise the construction of schools, mosques, police stations and courts. The uprising in Syria has also threatened attempts to enter that nascent market by companies like Renaissance, which had plans to invest in a shopping and hotel complex in Aleppo. According to Tolga Mut, the business development manager at STFA, governments and companies across MENA are now being “more conservative” with their investments.

RETURNING HOME: Meanwhile, some Turkish contractors are again looking at the domestic market, with the upcoming mega-projects proving to be a huge draw. Even companies that had fully abandoned the Turkish market now appear to want a piece of the action. However, contractors are finding that, with the unrest in the MENA region putting a damper on the business climate, they are not the only ones invited to the party. As Mut told OBG, “The most important problem is competition, because everyone is looking for business here. Contractors who have been working in MENA and Europe are coming to the Turkish market.”

Over the long term, however, global markets should pick up again and Turkish contractors should be able to continue their expansion. Africa is increasingly seen as a frontier region ready to be tapped, and Turkey’s increasing diplomatic and economic ties to the continent should smooth the way. The Turkey-Africa Trade Bridge summit held in Istanbul in December 2011 was expected to lead to $350bn in mutual trade agreements, with construction a leading focus. The government’s 14 new embassies in Africa are another sign of interest, and the country’s contractors may hope that it will not only be diplomats who are building bridges.