47. In August 1999, North West Turkey suffered a
huge earthquake along the Anatolian fault line, measuring 7.4
on the Richter scale, with significant loss of life. It was clear
immediately that vast reconstruction work would be necessary.
The World Bank estimated the costs would be $4.6 billion. Most
of these costs will be met by finance from the World Bank, IMF
and EU through its Earthquake Reconstruction funds, worth
48. In September 1999 Nick Raynsford, Construction
Minister at the Department of the Environment, Transport and the
Regions, visited the Yalova province while in Turkey on a trade
mission. The outcome was the British Earthquake Consortium for
Turkey (BECT). Six UK firms (Balfour Beatty JV, Ove Arup, John
Laing, Thames Water, Bovis Lend Lease and Hyder Consulting) committed
themselves to a study of the Yalova province to establish a strategy
and priority projects for reconstruction. The study cost £2
million, funded jointly by DETR and the Consortium.
49. Once BECT had carried out data collection and
consultation, it produced a 'Long List' in the Final Report of
115 projects needed in the province over the short, medium and
long term in further consultation with Ministries both in Ankara
and in regional offices. The Ministry of Public Works (MoPW) was
involved closely at all levels over different Directorates. Every
Governor and Mayor in Yalova Province was visited and the Project
Implementation Unit at the World Bank advised. A seminar for mayors
and technical advisors was given in April 2000.
50. An Interim Report was produced on target in June
2000 and the Final Report was delivered on time and to budget
in August 2000. From the 'Long List', five Priority Projects were
identified; solida waste management systems, provision of clean
water to all Municipalities, sewage collection treatment and disposal,
a 200 bed hospital with Public Health Laboratory and a university.
BECT were also asked by the Turkish authorities to consider a
tourism project in Termal and a new Yalova Province Master Plan.
51. The cost of these proposals is $850 million.
This seems to have surprised many in Turkey. BECT were offered
$50 million in credit from ECGD at the start of the study. We
gathered the impression from the authorities in Yalova that there
had been some confusion about this situation. We heard subsequently
that the nature of this money was not fully understood in Turkey.
It was regarded variously as money that would cover the cost of
the entire project and as floating funding for money already spent.
We have been reassured by various sources that the UK funding
position has remained the same from the outset. Additional confusion
has arisen over a lack of communication between the Turkish Ministry
of Public Works, and the Ministry of Finance which must authorise
the expenditure. In a meeting with the Minister of Economy in
Ankara, we heard of the reservations in the government in funding
such an expensive project for the benefit of just one, not particularly
52. In November 2000, shortly after our visit to
Yalova, BECT submitted a second proposal to the Turkish authorities.
The Integrated Environmental Project would concentrate on the
water and sewage systems. It would repair the damage caused to
the water infrastructure by the earthquake and within five years
it would provide fresh water and waste disposal systems, compliant
to EU standards. The cost is around $300 million. ECGD's $50 million
cover can be used for this project. A joint investment of a further
$50 million has been promised by Balfour Beatty, Thames Water
and the Turkish company Koc Group, dependent on a 30 year contract
Concession Agreement. Further finance from international institutions
such as the European Investment Bank would require cover. There
are high hopes of an EIB soft loan of $80-100 million. The project
could be completed in three phases which would spread the cost,
and enable work to begin this year, but would lengthen the construction
time and raise the overall eventual cost. Should the Integrated
Environmental Plan go ahead, offshore goods and services would
be needed to the tune of $80 million. This is something of which
the UK should ensure it is in a position to take advantage.
53. In both construction plans, the ultimate owners
of the work would be a Union of Municipalities of Yalova Province.
Whilst this Union has yet to be established, similar bodies on
a smaller scale have been set up in the region, the Mayor of Yalova
is taking the lead in developing it. The Turkish Government would
guarantee the loan which would ultimately be paid back through
revenues. We are aware that the Izmit Dam Project, which we also
visited in November 2000 and which was promised Turkish Government
backing through payment for water produced, found itself in trouble
when the Government failed to keep its guarantee. At present,
the Government is yet to make a decision on either plan, but a
statement is expected as this Report shortly is to be published.
We are aware that the new rescue programme includes a resolution
to block new spending and investment if not necessary. We realise
this may have some impact on a decision regarding Yalova. We
urge the UK government to make all efforts possible to secure
more funding for the Yalova project to give it a chance
of approval by the Turkish government. It would be unfortunate
if this project, benefiting the UK and Turkey, were to be lost.
54. We have looked at this is some detail as we were
concerned that a project intitially presented to us as representing
a good example of UK-Turkish trade was in fact at risk of damaging
that relationship. We were also aware that recent DETR-sponsored
reconstruction initiatives, such as that in Kosovo, have had little
real impact. We are glad to see the UK involved in a scheme
for a new modern waste water system in Yalova, positioning itself
to take advantage of contracts arising from both immediate and
long term projects. We hope to hear in the near future that the
Turkish Government has approved this plan.