Turkey’s Construction Sector in Crisis

The collapse in Turkey’s currency and surging interest rates have plunged the country’s construction industry into recession.  The construction sector was the driving force of the country’s booming economy and with it President Recep Tayyip Erdogan’s electoral success.

Istanbul’s Fikirtepe district is the center of a massive urban redevelopment project, but dozens of cranes are idle, with most workers laid off.  Turkey’s once-booming construction sector has come to a grinding halt.

The currency collapse drove up the cost of imported materials, and industry has also suffered from massive interest rate hikes, which increased loan repayment costs while drying up demand for new homes.  

“At least at half of these builders will exit or the market or go bankrupt,” said analyst Atilla Yesilada of Global Source Partners, ”there is a huge oversupply in particular in the luxury sector, which cannot be liquidated.  The government has tried several mechanisms that didn’t work because they don’t have the money.”

Workers unpaid

Workers owed thousands of dollars in unpaid wages are seizing some luxury apartment blocks in Istanbul.

“I live with my wife and two children, and we can’t afford to pay our rent and monthly expenses anymore,” said construction worker Taner Mutlu, “That’s why I am in protesting here for 56 days.  We can only live with debt.”

Mutlu claims he is owed about $40,000 and many suppliers and contractors are also owed money.

The construction crisis has seen many families losing their homes.

In the Fikirtepe district, about 2,000 families gave up their old homes in exchange for the promise of new apartments in massive developments built on the land where their houses stood.  A sizable cavernous hole is all that remains of their dream homes.

The families now occupy the abandoned construction site.  Weekly meetings are held in a metal container, which serves as a campaign headquarters in their battle to seek redress.  Many of those attending have photos of their old homes on their telephones, a painful reminder of a lost way of life.

“At 60 years old I have been kicked out of my home, my household, my land,” said Zeynep Duzgunoglu.  “All these contractors,” she added her voice now trembling with emotion, “men with briefcases, came, lied and embezzled people and had families sign away their lands and now they are not building.”

Widespread trouble

The construction industry was the engine of more than a decade of unprecedented Turkish economic growth.  Given construction’s large supply chains, economists estimate up to a third of Turkey’s economy is impacted by the sector.

“After tourism, it’s the most labor-intensive industry.  It pulls the most inputs from a diverse range of industries,” said analyst Yesilada.

Observers say prosperity is the key to Erdogan’s 16 years of unbroken electoral success.

“The construction bosses have also financed AKP election campaigns,” said Yesilada. “You see hundreds of thousands of jubilant people screaming at the rallies, they are bused in.  These construction bosses hire hundreds of coaches for the rallies.”

State building projects are continuing in a bid to keep the construction industry alive.  Last month saw the opening of Istanbul’s new airport, touted as one of the world’s largest.  Next year, Erdogan promises to start building 43-kilometer long canal near Istanbul, with accompanying new towns.  

Despite the scale of the projects that run into billions of dollars, they risk being dwarfed by the size of construction sector crisis.

“I haven’t seen anything like this for 35 years,” said, Mustafa Adnan Akyol, a veteran construction worker organizer.

“I have never experienced such a scale of people being laid off,” he added, “Salaries not being paid, and working conditions being this terrible.  We had all these before, but this time it is 100 times worse.  It is not something small.  It is huge and affecting big time.  Unemployment started because the construction sites came to a halt.”

Recent polls indicate a sharp drop in support for Erdogan’s AKP Party, with crucial local elections for control of Turkey’s cities due in March.

“This [crisis] has employment implications, unemployment workers won’t vote for AKP, and campaign finance implications, construction companies don’t have the money to support AKP anymore, this is why AKP is slipping in the polls,” said Yesilada.

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