Q1 2015
www.businessmonitor.com
TURKEY
WATER REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 2052-7683
Published by:Business Monitor International
Turkey Water Report Q1 2015
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: October 2014
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Turkey Water Report Q1 2015
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
Water SWOT ............................................................................................................................................ 9
Political ................................................................................................................................................. 11
Economic ............................................................................................................................................... 13
Business Environment .............................................................................................................................. 14
Industry Forecast .............................................................................................................. 15
Turkey Water Forecast ............................................................................................................................. 15
Water Extraction .................................................................................................................................... 16
Table: Water Extraction, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Water Consumption ................................................................................................................................ 19
Table: Water Consumption, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Water Treatment And Sanitation ............................................................................................................... 22
Table: Water Treatment, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table: Water Sanitation Networks, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Industry Risk Reward Ratings .......................................................................................... 26
Turkey Risk/Reward Ratings ...................................................................................................................... 26
Table: Europe Water Sector Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Rewards ............................................................................................................................................... 26
Risks .................................................................................................................................................... 27
Market Overview ............................................................................................................... 28
Water Supply And Consumption ................................................................................................................
Industrial And Agricultural Consumption ...................................................................................................
Distribution ..........................................................................................................................................
Water Treatment and Sanitation ................................................................................................................
28
30
31
32
Table: Number of Wastewater Treatment Plants by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Regulations and Tariffs ........................................................................................................................... 34
Industry Trends And Developments ................................................................................ 37
Key Projects, Industry Trends & Developments ............................................................................................. 37
Table: Turkey Water Infrastructure Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Competitive Landscape .................................................................................................... 42
Ministry of Forestry and Water Affairs, and Other Government Ministries ........................................................ 42
State Hydraulic Works (DSI) .................................................................................................................... 42
Municipalities ....................................................................................................................................... 43
Global Industry Overview .................................................................................................. 44
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Turkey Water Report Q1 2015
Demographic Forecast ..................................................................................................... 47
Table: Population Headline Indicators (Turkey 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Table: Key Population Ratios (Turkey 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Table: Urban/Rural Population & Life Expectancy (Turkey 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table: Population By Age Group (Turkey 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table: Population By Age Group % (Turkey 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Methodology ...................................................................................................................... 52
Industry Forecast Methodology ................................................................................................................ 52
Sources ................................................................................................................................................ 54
Risk/Reward Index Methodology ............................................................................................................... 54
Table: Water Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
© Business Monitor International
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Turkey Water Report Q1 2015
BMI Industry View
BMI View: This quarter we have expanded our forecast coverage to include extraction by source (including
spring, well, sea, river and reservoir) and mains, non mains and household water consumption. These
additions have resulted in a substantial alteration to our existing forecast figures.
We believe the drought which plagued the country for much of 2014, the reduction of the water resources,
and the rising demand for thermal electricity generation pose serious risks to the Turkish water sector.
Moreover, continued regional tensions between Turkey and its neighbours concerning the former's
extensive dam construction and the latter's calls to slow or even halt construction of many of Turkey's water
infrastructure projects will have a long-term impact on the sector.
The ongoing upheaval in Syria and Iraq has significant implications for Turkey's own water sector. At
present, the Iraq-based militant group Isis now has control of a significant portion of the water supplies in
Iraq, both desalination facilities and dams. This arguably intensifies Iraq's reliance on limited supplies from
the Tigris and Euphrates rivers, which are already constrained by the large-scale dam projects in Turkey.
However, there are also potential risks to the Turkish dam projects should Isis seek to control water supplies
further up river, or if the conflict spills onto Turkish soil. Equally, the fact that Turkey's actual neighbors in
Iraq and Syria are no longer the regimes in Baghdad and Damascus, limit Turkey's ability to enact peaceful
negotiation concerning water management issues. However, such negotiations will be vital to the ability of
the militant groups to establish independent states, as the entire area is reliant on turkey's rivers. Therefore
at some point, we anticipate some attempted water cooperation discussions.
Turkish Prime Minister Recep Tayyip Erdogan secured victory in the first round of Turkey's first ever direct
presidential elections on August 10 2014. While our Country Risk team highlights that this implies a
continued drive to consolidate influence over the central bank, judiciary and media, which could threaten
financial markets, we note that as many of Turkey's major infrastructure projects are heavily supported by
Erdogan and his administration, we expect the government will continue to throw its weight behind
projects. This is especially the case should Erdogan's chosen cabinet remain the same as during his term as
Prime Minister. The government's efforts to assure infrastructure investor confidence have seemingly begun
to have an effect.
The country's endemic water pollution issues, particularly from industrial pollutants, highlight the need for
further investment into this sector. Additional legislation is also needed, and more rigorously enforced
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Turkey Water Report Q1 2015
penalties. For example, high levels of arsenic have been found in the Ankara water supplies, and despite
numerous warnings from officials, the municipality has not addressed the issue.
Key Trends And Developments
■
The construction of an 80km water pipeline connecting Turkey and Northern Cyprus is 55% complete.
■
Tunnel boring work at the 104MW Kargi hydropower plant in Corum province, Turkey, has been
completed.
■
The Van region suffered severe water shortages during droughts in September.
■
Yalova was left with one day of water supplies at the height of the drought as the Gokce Dam ran dry.
■
Authoritiies considered transporting water for drought-ridden Istanbul, from over 100km away from the
Melen River, in August. The Papuçdere reservoir had dropped to 0.05% capacity and the Kazandere
reservoir was at 9.17% capacity.
■
The Melen reservoir to cater to Istanbul's additional water demand will increase the city's water capacity
from 750mn litres to 1bn cu m, and is due form completion in December 2016.
■
The Minister for the Environment called for government-imposed water restrictions.
■
IS threatened to attack Istanbul if more waters were not released down the Euphrates and Tigris rivers
into neighbouring countries
Key BMI Forecasts
■
We forecast total extraction to reach 7,200mn cbm over 2015.
■
Of this the majority will come from surface water sources, predominantly reservoirs, which will provide
over 4,766mn cbm m in 2015.
■
Water consumption will reach 5,100mn cbm.
■
Mains consumption accounts for 3,273mn cbm of this.
■
Non mains consumption will reach 1,826mn cbm.
■
6,271mn cbm of wastewater will be collected.
■
4,127mn cbm of wastewater will receive some form of treatment.
© Business Monitor International
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SWOT
Water SWOT
SWOT Analysis
Strengths
■
Turkey's water resources are significant in some areas, particularly the Tigris and
Euphrates rivers.
■
Government has embarked on an extensive modernisation and development process
which aims to preserve and improve water quality.
Weaknesses
■
Increasing number of households connected to mains water and sewage networks.
■
Water resources experiencing a drastically rapid decline as more is consumed than
can be regenerated.
■
Prolonged droughts could result in water rationing, declining energy generation and
rising food prices.
■
Turkey has relatively high pollution levels.
■
Turkey is mismanaging its water resources through damaging management policies,
forestation practices and irrigation methods.
■
Exceptionally high water losses.
■
Regional tensions with neighbours concerning Turkey's large projects could inhibit
further developments and halt ongoing construction.
Opportunities
■
The country is facing a growing and increasingly urban population, and rapidly
expanding commercial and industrial sectors, all of which require large volumes of
good quality water.
■
Turkey seeks to expand its irrigated arable land and develop a number of heavily
water-dependent industries.
■
Focus on improving sanitation and water treatment services across the country.
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SWOT Analysis - Continued
Threats
■
Ongoing domestic unrest is deterring investors and shrinking the project pipeline.
■
Continued drought could result in electricity imports and declining crop production.
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Turkey Water Report Q1 2015
Political
SWOT Analysis
Strengths
■
Turkey maintains a military alliance with the US, which has consistently supported the
country in multilateral institutions such as the IMF.
■
In contrast to some other Muslim states, the strong traditions of secularism and the
gradual entrenchment of parliamentary democracy limit the appeal of extremist
groups.
Weaknesses
■
There has been no resolution to the decades-old conflict over the partition of Cyprus a key impediment to deeper EU integration.
■
Kurdish desire for autonomy or separatism - which could be encouraged by Kurdish
groups' push for autonomy in northern Iraq - presents a threat to stability and political
reform.
■
Political divisions between moderate Islamists and secularists are a constant source
of tension that has frequently delayed the policymaking process in the past.
■
Turkey's support for the Muslim Brotherhood and attempts at extending its foreign
policy influence in the region has resulted in strained diplomatic relations with Israel,
Baghdad and Syria, among others.
Opportunities
■
Turkey has sought rapprochement in its long-strained ties with Cyprus, Iran and
Armenia.
■
A peace process with the militant Kurdistan Workers' Party (PKK) remains on track,
which if seen to completion would offer a significant peace dividend.
Threats
■
The ruling Justice and Development Party's goal of changing the constitution to
create an executive presidency could consolidate un-checked power under President
Erdogan and erode the legitimacy of Turkey's parliamentary democracy.
■
Security risks from Kurdish separatist militants and anti-government organisations
remain a concern in Turkey, especially in the south-eastern part of the country.
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Turkey Water Report Q1 2015
SWOT Analysis - Continued
■
There is a significant risk that Turkey could face reprisal if it chooses to take a more
active role in the fight against the Islamic State in Iraq and Syria.
■
Divisions between the moderate Islamist government and secular institutions pose
serious threats to the policy agenda.
■
Growing popular anger towards Prime Minister Recep Tayyip Erdogan's increasingly
autocratic tendencies pose an ongoing threat to social stability, as large scale
protests are likely to become a more common occurrence.
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Turkey Water Report Q1 2015
Economic
SWOT Analysis
Strengths
■
Economic reform - especially of state-owned industries and the banking sector - has
broad political support in the government.
■
Turkey enjoys a strategic geographic location and an open and increasingly liberal
trade and investment climate.
■
A young and rapidly growing population provides a key element of long-term growth
potential.
Weaknesses
■
Reliance on short-term foreign capital inflows and borrowing from abroad presents a
danger to economic stability by leaving Turkey susceptible to capital flight during
periods of tightening global liquidity or risk aversion.
■
A structural current account deficit, driven by Turkey's massive energy import needs,
implies that economic rebalancing will proceed at only a sluggish pace in the coming
years.
Opportunities
■
Despite a lack of progress in the EU accession process, Turkey is still a major
convergence play for investors.
■
The reform programme is likely to increase the opportunities for investment in
privatised state firms.
Threats
■
Monetary policy credibility and independence from government influence has recently
been called into question.
■
Regional instability has contributed to increased sectarian hostility towards the
government with sporadic incidence of violence along border regions with Syria.
Instability in Syria or Iraq, or domestic (or regional) terrorism could lower investor
confidence and cap much needed fixed investment levels.
© Business Monitor International
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Turkey Water Report Q1 2015
Business Environment
SWOT Analysis
Strengths
■
Structural reforms in the last decade, especially those aimed at improving
transparency and increasing capitalisation within the banking system, have bolstered
private sector liquidity.
■
Turkey benefits from membership in a customs union with the EU, which makes it a
very attractive platform for export-oriented manufacturers.
Weaknesses
■
The country has high levels of literacy and foreign language skills.
■
A reliance on short-term debt financing increases the economy's vulnerability to
investment outflows.
■
Tax evasion is widespread.
■
Procedures for hiring and firing staff are more highly regulated than in developed
European states.
Opportunities
■
The government has pushed forward new pension and labour code reforms that aim
to lower labour costs for businesses.
■
Government has demonstrated a commitment to the privatisation of state-owned
firms.
Threats
■
The violence in neighbouring Syria and Iraq, and waning potential for a successful
peace deal with the domestic Kurdistan Workers Party (PKK) militant group has the
potential to scare off investors, particularly those seeking to exploit resources in the
south of the country.
■
Deteriorating diplomatic relations with the European Union threaten the progress
towards a gradual alignment of the institutional and legal framework towards EU
norms via the accession process.
© Business Monitor International
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Turkey Water Report Q1 2015
Industry Forecast
Turkey Water Forecast
BMI View: Overall, we forecast ground water extraction to increase steadily over the next five years,
however this growth will largely be catered to b y surface water sources. This is due to the combination of
the fact that the country's ground water reserves are declining, and the number of dams and desalination
projects are increasing available surface water. This latter factor is in turn supporting our expectations of
moderate growth in consumption (both mains and non mains) as domestic and industrial users alike
capitalise on the increase in water availability in many regions. Moreover, additional investment is
boosting wastewater collection, as networks expand, and treatment capacity, resulting in larger volumes of
recycled wastewater available for use, particularly by industrial and agricultural consumers. We expect
especially strong growth in the underdeveloped advanced wastewater treatment sector.
We still believe Turkey's water sector is becoming increasingly modern and well developed following a
large amount of investment into water extraction, treatment and distribution infrastructure and sanitation
infrastructure. However more work is still needed as the country is facing a growing and increasingly urban
population, and rapidly expanding commercial and industrial sectors, all of which require large volumes of
good quality water. The issue of water availability is likely to cause increased tensions in future as
renewable ground water reserves decline and cross-boundary water flows become more controversial.
The water crisis faced in much of the country over 2014 is indicative of two problems - one is the lack of
water resources in many areas, despite the fact Turkey has access to water from two of the largest rivers in
the region. Turkey consumes more water each year than can be naturally regenerated, which means it relies
on heavy rainfall or recycled water. The second issue is the lack of an efficient water management plan and
awareness education programme to encourage conservative water consumption habits, among domestic and
industrial users. The effects of low tariffs, limited natural resources and wasteful consumption practices
plague the country as a whole and can be seen on a smaller scale in Istanbul at present.
However, there are additional implications with regards to the threat of rising food and electricity prices, as
agricultural yields are down and hydropower generation is declining, which could result in the need for
costly electricity imports. This latter issue is compounded by the fact that water is needed for cooling for
thermal electricity generation. With declining hydropower production, thermal generation needs to be
ramped up, requiring yet more of the increasingly scarce water resources.
© Business Monitor International
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Turkey Water Report Q1 2015
The ongoing upheaval in Syria and Iraq has significant implications for Turkey's own water sector. At
present, the Iraq-based militant group Isis now has control of a significant portion of the water supplies in
Iraq, both desalination facilities and dams. This arguably intensifies Iraq's reliance on limited supplies from
the Tigris and Euphrates rivers, which are already constrained by the large-scale dam projects in Turkey.
Turkey's actual neighbors in Iraq and Syria are no longer the regimes in Baghdad and Damascus and we
believe this will limit Turkey's ability to enact peaceful negotiation concerning water management issues.
Moreover, IS is demanding that Turkey increases the volumes of water it lets into Iraq under threat of an IS
'liberation' of Istanbul. However we believe this threat is unlikely to be fulfilled as IS is already stretched
across many fronts, and Turkey has a large standing army.
Turkey's rising water consumption levels is a source of some concern for BMI as the country is using its
water reserves at a faster rate than they can be renewed. Moreover, according to NASA studies, the country
has the second worst rate of water evapo-transpiration in the world. This decline in water resources will
cause future issues, and these in turn are likely to be exacerbated by the exceptionally high rate of water
losses in distribution networks, with about 45% of all drinking water extracted being lost.
Moreover, pollution is still a problem for Turkey, particularly in less urbanised areas, and the country has to
make a number of extremely large investments into water infrastructure in order to comply with EU
regulations and directives concerning water quality and the availability of potable water.
The improvement of water networks and pipelines is likely to be a key focus for the government and water
companies, as will water treatment and sanitation plants, as Turkey has had a number of bad pollution
scandals over the past year and this needs to be addressed in order to comply with EU regulations set out in
the Water Framework Directive. Moreover, the government needs to tackle a number of issues raised in
various recent studies which argue that Turkey is mismanaging its water resources through damaging
management policies, forestation practices and irrigation methods.
Water Extraction
Turkey is currently extracting more water than is being replaced naturally. This is only going to get worse in
the future as water extraction increases due to higher domestic, industrial and agricultural demand, and
ongoing droughts.
Turkey's water resources are vast, particularly as it has access to the Euphrates and Tigris. However they are
not always efficiently managed, and NASA research has shown that they are experiencing a drastically
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Turkey Water Report Q1 2015
rapid decline. Currently the region as a whole and these rivers in particular are experiencing the second
largest drop in volumes of available water and natural water renewal rates in the world.
This regional shortage is resulting in tensions between Turkey and its neighbours concerning its high water
usage. Tensions with Iraq in particular persist, as the countries are unable to reach an equitable agreement
concerning the division of the shared river waters.
As noted above, we anticipate a steady 4% average growth in total extraction volumes between 2015 and
2018. As turkey's vast dam project pipeline is beginning to shorten as projects reach completion, we
anticipate a substantial uptick in the overall volume of surface waters extracted (up from 4766mn cubic
metres to over 5700mn). This will largely come from reservoirs, which account for over 62% of surface
water extraction and around 41% of total water extraction. Lake and sea water extraction (including
desalinated water) will see even stronger growth, at over 8% on average. This is due to rising industrial
usage, in particular, of desalinated waters. However, as over extraction has severely reduced available
ground water reserves, we anticipate that overall ground water extraction will see a moderate decline, of
around 2% year-on-year.
Table: Water Extraction, 2011-2018
2011
2012
2013
2014e
2015f
6,487.1
6,567.6
6,775.2
6,986.1
7,200.0
1.3
1.2
3.2
3.1
3.1
3.4
3.9
3.9
Total water extraction, litres per
person per day
243.3
243.2
247.7
252.4
257.2
263.3
270.8
279.0
Total water extraction, litres per
household per day
920.3
916.3
929.7
943.5
958.7
978.3 1,003.5
1,032.0
Underground water extraction,
mn cubic metres
2,680.2
2,645.9
2,552.0
2,479.9
2,433.2
2,385.4 2,336.7
2,295.8
Underground water extraction,
% change y-o-y
-1.3
-1.3
-3.5
-2.8
-1.9
-2.0
-2.0
-1.7
Underground water extraction,
% of total water extraction
41.3
40.3
37.7
35.5
33.8
32.0
30.2
28.6
Underground water extraction,
litres per person per day
100.5
98.0
93.3
89.6
86.9
84.3
81.8
79.7
1,663.1
1,666.4
1,680.9
1,692.7
1,701.0
1,710.6 1,721.9
1,732.3
Total water extraction, mn cubic
metres
Total water extraction, %
change y-o-y
Well water extraction
© Business Monitor International
2016f
2017f
2018f
7,445.3 7,733.4
8,037.7
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Turkey Water Report Q1 2015
Water Extraction, 2011-2018 - Continued
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
0.2
0.2
0.9
0.7
0.5
0.6
0.7
0.6
Well water extraction, %
underground water extraction
62.1
63.0
65.9
68.3
69.9
71.7
73.7
75.5
Well water extraction, % total
water extraction
25.6
25.4
24.8
24.2
23.6
23.0
22.3
21.6
1,017.1
979.4
871.1
787.2
732.2
674.7
614.8
563.5
Spring water extraction, %
change y-o-y
-3.6
-3.7
-11.1
-9.6
-7.0
-7.8
-8.9
-8.3
Spring water extraction, % of
total water extraction
15.7
14.9
12.9
11.3
10.2
9.1
7.9
7.0
Spring water extraction, litres
per person per day
38.1
36.3
31.8
28.4
26.2
23.9
21.5
19.6
Surface water extraction, mn
cubic metres
3,806.9
3,921.7
4,223.2
4,506.2
4,766.8
5,060.0 5,396.7
5,741.9
3.1
3.0
7.7
6.7
5.8
6.1
6.7
6.4
Surface water extraction, % of
total water extraction
58.7
59.7
62.3
64.5
66.2
68.0
69.8
71.4
Surface water extraction, litres
per person per day
142.8
145.2
154.4
162.8
170.3
178.9
189.0
199.3
River water extraction, mn cubic
metres
181.9
140.3
138.9
137.5
136.2
134.9
133.6
132.3
River water extraction, %
change y-o-y
-18.6
-22.9
-1.0
-1.0
-1.0
-1.0
-1.0
-1.0
River water extraction, % of total
water extraction
2.8
2.1
2.1
2.0
1.9
1.8
1.7
1.6
River water extraction, litres per
person per day
6.8
5.2
5.1
5.0
4.9
4.8
4.7
4.6
2,426.6
2,502.8
2,687.2
2,852.6
2,994.6
3,156.6 3,345.3
3,533.6
3.2
3.1
7.4
6.2
5.0
5.4
6.0
5.6
Reservoir water extraction, % of
total water extraction
37.4
38.1
39.7
40.8
41.6
42.4
43.3
44.0
Reservoir water extraction, litres
per person per day
91.0
92.7
98.2
103.1
107.0
111.6
117.2
122.7
Well water extraction, % change
y-o-y
Spring water extraction, million
cubic metres
Surface water extraction, %
change y-o-y
Reservoir water extraction, mn
cubic metres
Reservoir water extraction, %
change y-o-y
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Turkey Water Report Q1 2015
Water Extraction, 2011-2018 - Continued
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
Lake and Sea water extraction,
mn cubic metres
1,198.4
1,278.6
1,397.1
1,516.1
1,636.0
1,768.5 1,917.9
2,076.0
Lake and Sea water extraction,
% change y-o-y
7.2
6.7
9.3
8.5
7.9
8.1
8.4
8.2
Lake and Sea water extraction,
% of total water extraction
18.5
19.5
20.6
21.7
22.7
23.8
24.8
25.8
Lake and Seawater extraction,
litres per person per day
44.9
47.3
51.1
54.8
58.4
62.5
67.2
72.1
e/f = BMI estimate/forecast. Source: BMI, National Statistics Institute
Water Consumption
With regards to consumption, it should be noted that we do forecast a moderate amount of water to be
exported from Turkey, to countries including Cyprus (via the soon-to-be completed pipeline), and to aid
Gaza and other water stressed populations. In addition, a substantial volume of water is lost pre-distribution
due to evapotranspiration from the reservoirs. This leaves, in our view, about 5100mn cubic metres for total
consumption (both mains and non mains).
However, losses do not stop with evaporation. A significant volume of Turkey's water supplies are also lost
during distribution, in the mains networks, owing to poor maintenance and archaic infrastructure in many
areas. This will result in losses of around 30% of all water extracted, equating to 2149mn cubic metres in
2015 alone. Until the government funnels more investment into the maintenance of existing infrastructure,
instead of the creation of new projects, we expect this heavy losses rate will continue.
Water losses continue to be the most significant of Turkey's issues with regards to the domestic water
sector. This is due to a combination of inadequate or archaic infrastructure, and the recent severe droughts
which have resulted in a high level of evaporation. Recent studies estimate that almost 160 days worth of
drinking water are lost each year on the way to domestic taps. These losses are compounding the water
shortages caused by the droughts, with reservoirs at a fraction of their usual capacity, and water cuts being
implemented in some areas, including Istanbul.
The majority of losses will be within the mains networks, which account for just under 40% of mains water
extraction. Though we anticipate a gradual decline in this as investment starts to filter through and
improvements in mains networks are implemented. Meanwhile, Non mains losses account for just 5.3% of
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Turkey Water Report Q1 2015
non mains extraction, largely due to the fact that extraction tends to occur close to the industrial plant, or
fields to which the water is transported, leaving less chance of losses on the way.
Total mains consumption will see a moderate uptick over the next few years, in our view, and this will
largely be driven by the growth in household connections and a moderate increase in household
consumption. Non mains will grow at a slightly slower rate, as usage is more heavily regulated for many
industries now, and in addition, we expect improved irrigation practises to reduce agricultural demand
somewhat.
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Turkey Water Report Q1 2015
Table: Water Consumption, 2011-2018
2011
2012
4,337.2
4,575.7
5.0
5.5
3.6
3.7
3.7
3.8
4.0
4.0
Total water consumption, litres per
person per day
162.6
169.4
173.3
177.7
182.2
187.3
192.9
198.9
Total water consumption, litres per
household per day
615.3
638.4
650.6
664.1
679.1
695.9
714.8
735.8
Total water consumption, % of total
water extraction
66.9
69.7
70.0
70.4
70.8
71.1
71.2
71.3
Total mains water consumption, mn
cubic metres
2,796.3
2,903.5
3,273.6 3,407.2 3,546.3
3,691.0
4.0
3.8
4.1
4.1
4.1
4.1
4.1
4.1
Total mains water consumption, litres
per person per day
104.9
107.5
110.5
113.6
116.9
120.5
124.2
128.1
Total mains water consumption, litres
per household per day
396.7
405.1
414.7
424.8
435.9
447.7
460.2
473.9
2,796.3
2,801.9
3,145.3 3,273.6 3,407.2
3,546.3
8.4
0.2
3.6
4.1
4.1
4.1
4.1
4.1
Household water consumption, litres
per person per day
104.9
103.7
106.2
109.2
112.4
115.8
119.3
123.1
Household water consumption, litres
per household per day
396.7
390.9
398.4
408.1
418.8
430.1
442.1
455.3
1,541.0
1,672.2
1,826.8 1,889.1 1,962.2
2,039.4
7.0
8.5
2.8
3.1
3.1
3.4
3.9
3.9
Total non-mains water consumption,
litres per person per day
57.8
61.9
62.9
64.0
65.3
66.8
68.7
70.8
Total non-mains water consumption,
litres per household per day
218.6
233.3
235.9
239.4
243.2
248.2
254.6
261.8
Total water consumption, mn cubic
metres
Total water consumption, % change yo-y
Total mains water consumption, %
change y-o-y
2013
2014e
4,741.0 4,917.9
3,022.0 3,145.3
2015f
2016f
2017f
2018f
5,100.5 5,296.3 5,508.5
5,730.4
Total mains water consumption, % of
total water consumption
Household water consumption, mn
cubic metres
Household water consumption, %
change y-o-y
2,903.5 3,022.0
Household water consumption, % of
total water consumption
Total non-mains water consumption,
mn cubic metres
Total non-mains water consumption, %
change y-o-y
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Turkey Water Report Q1 2015
Water Consumption, 2011-2018 - Continued
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
35.5
36.5
36.3
36.0
35.8
35.7
35.6
35.6
Water losses, mn cubic metres
2,184.9
2,158.1
2,149.9 2,148.7 2,154.5
2,158.9
Water losses, % change y-o-y
-1.2
-1.2
0.0
-0.1
-0.3
-0.1
0.3
0.2
Water losses, % of total water
extraction
33.7
32.9
31.9
30.9
29.9
28.9
27.9
26.9
Total non-mains water consumption, %
of total water consumption
2,158.6 2,155.9
e/f = BMI estimate/forecast. Source: BMI, National Statistics Institute
Water Treatment And Sanitation
Turkey's water treatment and sanitation infrastructure has undergone a lot of work in recent years, both
modernising existing facilities and extending pipelines, and building new water and wastewater treatment
plants.
Despite a large amount of investment and an impressive increase in the number of wastewater treatment
plants in the last decade which saw an increase in capacity from just over 2,000mn m3 in 2000 to almost
5,300mn m3 by 2010, the country still needs a lot more investment, as is shown by the various pollution
issues caused by faulty or obsolete infrastructure. These include the recent announcement by the ISKI that
raw sewage from the village of Sazlibosna has been contaminating the 55mn m3 Sazlide reservoir, one of
Istanbul's largest water reservoirs, for over a year.
Many of the city's main reservoirs were also exposed to this pollution. An expert from the Fatih University
Department of Environmental Engineering, Mehmet Borat, urged that reservoirs be built away from
settlements if possible, and warned that if proximity is inevitable, any cesspools must be leak-proof. He also
recommended that regular inspections should take place.
His comments reveal the continuing lack of official protocol and regulations with regards to water
infrastructure in Turkey and show that it is not just the modernisation of water infrastructure which is
needed, but a whole set of legislation to ensure that such pollution does not occur again.
Turkish wastewater volumes are increasing and will continue to do so according to our forecasts. We
forecast total wastewater discharged in 2015 will reach 6271mn m3 - a 3.85% increase on 2014 figures.
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Turkey Water Report Q1 2015
This trend will continue throughout the forecast period, and total wastewater will reach around 7063mn m3
by 2018.
This will occur for a twofold reason. On the one hand, consumption volumes are increasing so, inevitably,
must wastewater volumes. However, the level of wastewater discharged into the networks is also increasing
because more households and industries are connected to the sewage networks and have access to
wastewater treatment facilities. Arguably, the forecast increase in wastewater discharged can be partially
ascribed to our belief that the government will continue to invest heavily in water treatment and sanitation.
Table: Water Treatment, 2011-2018
2011
Total waste water, mn cubic
metres
Total waste water, % change yo-y
2012
2013
2014e
2015f
2016f
2017f
2018f
5,225.4 5,612.5
5,820.1
6,042.1
6,271.5
6,517.6
6,784.2
7,063.2
8.0
7.4
3.7
3.8
3.8
3.9
4.1
4.1
Total waste water, litres per
person per day
196.0
207.8
212.8
218.3
224.0
230.5
237.6
245.2
Total waste water, litres per
household per day
741.3
783.0
798.7
816.0
835.1
856.4
880.3
906.9
1,995.3 2,115.9
2,126.0
2,136.4
2,144.4
2,152.5
2,161.6
2,168.5
Untreated discharged water,
mn cubic metres
Untreated discharged water, %
change y-o-y
6.4
6.0
0.5
0.5
0.4
0.4
0.4
0.3
Untreated discharged water,
litres per person per day
74.8
78.3
77.7
77.2
76.6
76.1
75.7
75.3
Untreated discharged water,
litres per household per day
283.1
295.2
291.7
288.5
285.5
282.8
280.5
278.4
38.2
37.7
36.5
35.4
34.2
33.0
31.9
30.7
3,230.1 3,496.6
3,694.1
3,905.6
4,127.2
4,365.1
4,622.5
4,894.7
Untreated discharged water, %
of total waste water
Treated discharged water, mn
cubic metres
Treated discharged water, %
change y-o-y
9.0
8.3
5.6
5.7
5.7
5.8
5.9
5.9
Treated discharged water, litres
per person per day
121.1
129.5
135.1
141.1
147.4
154.3
161.9
169.9
Treated discharged water, litres
per household per day
458.2
487.8
506.9
527.4
549.5
573.6
599.8
628.5
Treated discharged water, % of
total waste water
61.8
62.3
63.5
64.6
65.8
67.0
68.1
69.3
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Turkey Water Report Q1 2015
Water Treatment, 2011-2018 - Continued
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
Mechanically treated water, mn
cubic metres
896.5
987.1
987.4
985.4
979.4
970.4
958.3
941.3
Mechanically treated water, %
change y-o-y
11.2
10.1
0.0
-0.2
-0.6
-0.9
-1.2
-1.8
1,162.9 1,224.2
1,284.2
1,338.2
1,393.4
1,451.9
1,514.5
1,579.2
5.3
4.9
4.2
4.1
4.2
4.3
4.3
1,164.0 1,276.5
1,422.5
1,582.1
1,754.3
1,942.8
2,149.8
2,374.3
11.4
11.2
10.9
10.7
10.7
10.4
Biologically treated water, mn
cubic metres
Biologically treated water, %
change y-o-y
Combined treated water mn
cubic metres
Combined treated water %
change y-o-y
5.6
10.7
9.7
e/f = BMI estimate/forecast. Source: BMI, National Statistics Institute
The majority of wastewater which is discharged into the sewage networks is treated. In fact, untreated
wastewater represents 34% of the total now and this percentage will continue to decline going forwards.
This is largely due to the government focus on increasing the number of water and wastewater treatment
plants, the Turkish government alone is estimated to have to invest around USD2bn a year for water
infrastructure projects currently in order to try and attain EU standards, and the control of industrial water
pollution entails an additional USD15bn of investments going forward.
Of the treated wastewater, the majority undergoes some form of combined treatment or biological
treatment, with only a small percentage being processed through mechanical treatment methods, and this
latter is forecast to continue to shrink as the volume of wastewater undergoing combined treatment methods
will see an average 11% increase year-on-year (y-o-y), and the volume of water treated biologically will see
average growth of around 4.2%.
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Turkey Water Report Q1 2015
Table: Water Sanitation Networks, 2011-2018
2011 2012 2013
2014e 2015f 2016f 2017f 2018f
Households connected to sewer network, mn
14.6
14.9
15.2
15.6
15.9
16.2
16.5
16.8
Households connected to sewer network, %
75.4
75.9
76.4
76.9
77.4
77.9
78.4
78.9
Population connected to sewer network, mn
55.1
56.1
57.2
58.3
59.3
60.3
61.3
62.3
Population connected to sewer network, %
75.4
75.9
76.4
76.9
77.4
77.9
78.4
78.9
e/f = BMI estimate/forecast. Source: BMI, National Statistics Institute
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Turkey Water Report Q1 2015
Industry Risk Reward Ratings
Turkey Risk/Reward Ratings
Turkey's score remains unchanged this quarter and it continues to sit near the top of the pack, between
Spain and Poland. Although it has abundant water supplies and a significant number of water infrastructure
projects under construction, pollution and high water losses are an ongoing issue as is a declining
project pipeline as companies are deterred by the political and economic risks at present. Moreover, the
country's regulatory environment for the water sector is somewhat incoherent and disorganised at times.
Table: Europe Water Sector Risk/Reward Index
Rewards
Risks
Rewards
Industry
Rewards
Country
Rewards
Risks
Industry
Risks
Country
Risks
Water
Score
Position
United Kingdom
85.38
94.83
63.33
68.61
80.00
61.01
78.67
1
France
69.87
72.67
63.33
57.54
53.33
60.34
64.93
2
Spain
67.70
71.00
60.00
58.96
46.67
67.16
64.21
3
Turkey
62.66
62.37
63.33
63.86
73.33
57.55
63.14
4
Poland
67.22
71.75
56.67
56.83
53.33
59.16
63.07
5
Germany
61.29
57.56
70.00
60.53
63.33
58.66
60.99
6
Russia
65.99
62.84
73.33
51.01
46.67
53.90
60.00
7
Czech Republic
62.85
68.36
50.00
50.21
46.67
52.57
57.79
8
Hungary
64.86
69.80
53.33
46.22
26.67
59.26
57.40
9
Romania
59.03
55.76
66.67
54.70
53.33
55.61
57.30
10
Italy
60.44
59.20
63.33
50.07
40.00
56.79
56.29
11
Ukraine
62.74
58.19
73.33
40.77
33.33
45.73
53.95
12
Serbia
50.72
49.61
53.33
52.01
46.67
55.58
51.24
13
Slovakia
56.32
63.31
40.00
42.79
33.33
49.09
50.90
14
Kazakhstan
42.77
39.67
50.00
45.89
40.00
49.82
44.02
15
Source: BMI
Rewards
Turkey is in fourth place in our regional water index, between Spain and Poland. Overall it scores well for
industry and country rewards. This score is comprised of market rewards and country rewards. Turkey
scores well for the latter owing to its large population and steady growth forecasts for both population and
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Turkey Water Report Q1 2015
household numbers. However, it also scores well for market rewards, which are comprised of per capita and
per household water extraction and consumption, wastewater treatment, and the population connected to
sewage and water mains networks. Turkey does not score so well with regards to water extraction as water
extraction is high, yet per capita consumption is low, emphasising the persistent inefficiency and high water
losses across much of their water networks. However the country has invested heavily in wastewater
collection and treatment facilities, and in improving connectivity to its high connectivity rates. This is
reflected in the strong overall market rewards score.
Risks
Turkey's overall risk reward score has benefited this quarter from the marked improvement in its is industry
risks score, to over 70, owing to the cessation of domestic unrest and economic uncertainty, which had
inhibited the construction sector somewhat over recent months, as attention and funds have been directed
elsewhere. Moreover, although the country has a good water management plan and some key regulations
are in place, the water sector as a whole lacks coherent organisation and regulation.
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Turkey Water Report Q1 2015
Market Overview
Water supply is likely to become an increasingly severe problem for Turkey. To counter this, the
government has embarked on an extensive modernisation and development process to improve water
quality nationally, to ensure all rural and urban residential and industrial developments have access to
drinking water and water treatment facilities, as well as capitalise on the vast quantity of water flowing
across the country by constructing numerous dams and hydroelectricity plants.
These projects have increased tensions with Turkey's neighbours, particularly Iran, Iraq and Syria, all of
whom are heavily reliant on the waters of the Euphrates and Tigris after they flow outside Turkey's borders.
According to the Iraqi Ministry of Water, 71% of Iraq's water comes from Turkey, and the overall volume
has been diminishing recently.
The ongoing upheaval in Syria and Iraq has significant implications for Turkey's own water sector. At
present, the Iraq-based militant group Isis now has control of a significant portion of the water supplies in
Iraq, both desalination facilities and dams. This arguably intensifies Iraq's reliance on limited supplies from
the Tigris and Euphrates rivers, which are already constrained by the large-scale dam projects in Turkey.
However, there are also potential risks to the Turkish dam projects should Isis seek to control water supplies
further up river, or if the conflict spills onto Turkish soil. Equally, the fact that Turkey's actual neighbors in
Iraq and Syria are no longer the regimes in Baghdad and Damascus, limit Turkey's ability to enact peaceful
negotiation concerning water management issues. Moreover, it will be far more complicated to arrange and
agree water management cooperation that suits all the affected parties, resulting in a more inconsistent and
incoherent water management plan across Turkey.
Water Supply And Consumption
Turkey has 26 hydrological basins, and a number of large rivers originate within its borders (and flow
beyond them) resulting in a number of highly important water treatises between Turkey and its water-poor
Middle Eastern neighbours particularly Syria and Iran. Total internal renewable water resources are
estimated (by Turkish statistics offices) as being at around 227km3/yr. Of which about 186km3 is surface
water and an additional 69km3 is ground water.
One of the largest rivers in the country is the Euphrates, although about 10% of the flow of this river comes
from run-off from Syria, while Turkey also contributes almost 40% to the other large trans-national river,
the Tigris, and an additional 11% to its tributaries which join the main river further down its path, outside of
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Turkey Water Report Q1 2015
Turkey. Moreover, unlike a number of its Middle Eastern neighbours, Turkey has a large number of
wetlands, over 250, making it regional leader. The majority of these are in the Anatolia region.
Turkey is not only a heavy water consumer, but is also set to start exporting its water supplies. The
construction of an 80km water pipeline connecting Turkey and Northern Cyprus is 55% complete. The
pipeline, called Baris Su, will deliver water to Cyprus. The pipeline that will connect two reservoirs in
Turkey and Northern Cyprus is expected to solve the island's water crisis. The Turkish authorities said the
pipeline will also benefit the Greek Cypriot administration in the south of the island. The pipeline may work
as a catalyst in the ongoing Cyprus peace talks. The USD500mn -project will provide 19.8bn gallons of
water
However, although exports will rise, the country is facing significant water security risks of its own, as has
been highlighted by the events of the past quarter. Reservoirs and lakes are diminishing at dangerous levels
and water levels in the Tigris and Euphrates have dropped to a third of their historical average. As a result,
more people are relying on groundwater, although aquifers are not managed well and thus the water table is
dropped significantly. Water stresses are being compounded by droughts and water losses. These losses are
compounding the water shortages caused by the droughts, with reservoirs at a fraction of their usual
capacity, and water cuts being implemented in some areas, including Istanbul.
The Van region suffered severe water shortages during droughts in September, while Yalova was left with
one day of water supplies at the height of the drought as the Gökçe Dam ran dry. Meanwhile, authorities
considered transporting water for drought-ridden Istanbul, from over 100km away from the Melen River, in
August. The Papuçdere reservoir had dropped to 0.05% capacity and the Kazandere reservoir was at 9.17%
capacity. Over the longer term, plans have been implemented to construct the Melen reservoir to cater to
Istanbul's additional water demand will increase the city's water capacity from 750 million liters to 1 billion
cubic meters, and is due form completion in December 2016. Moreover, the Minister for the Environment
called for government-imposed water restrictions.
The Turkish government has invested heavily over the past 2 decades to capitalise on this large water
supply, with almost 800 dams and a large number of irrigation projects and water service and supply
developments either completed or in planning. One such is the Ataturk dam on the Euphrates, which is
currently one of the 10 largest dams in the worlds. Under Turkey's Southeastern Anatolia Project (GAP), a
multi-sector regional development initiative, Turkey aims to build 19 hydro plants and 22 more dams on the
two crucial rivers. There have been worries that Turkey is mismanaging its water resources through
damaging management policies, forestation practices and irrigation methods. This could have long term
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Turkey Water Report Q1 2015
effects on future water availability, and could a) result in decreased water available for industries and
agriculture as the government is forced to ration supplies between domestic and industrial use, as has started
to occur on other water stressed nations; b) result in higher tariffs for extraction, consumption and treatment
of water by industries; and c) cause long-term rifts with its neighbours who are challenging Turkey's right to
develop large numbers of dams.
For example, Turkey's construction of the controversial USD2bn Ilisu dam project on the Tigris River,
could parch 670,000 hectares of Iraqi farmland according to Iraqi officials. This issue is unlikely to
dissipate, with many official agreements between countries in the Tigris-Euphrates basin pre-dating the fall
of the Hussein regime and the conflict in Syria. IS threatened to attack Istanbul if more waters were not
released down the Euphrates and Tigris rivers into neighbouring countries
Industrial And Agricultural Consumption
About 75% of fresh water is used for agricultural purposes, 15% in homes and the remaining 10% is used
for industrial purposes. Turkey's Forestry and Water Affairs Ministry said there are 313 reservoirs in the
country, as well as 203 small lakes, which are used as reservoirs. There are a number of industries in Turkey
which are highly reliant on water, including petrochemicals, metals production, and mining. BMI believes
the petrochemicals sector's water consumption and discharge is set to see a huge increase as the industry is
going to expand rapidly over the next decade, while we believe the metals industry (which is a large
consumer of water in the production process) has seen extremely strong growth recently and will continue
to do so. According to government statistics, approximately 74% of water extracted was used for irrigation,
15% for municipal purposes, and 11% for industrial.
However, the government expects water demand to continue to increase rapidly as the population expands
and more and more of the country is fully connected to the mains water and sewage networks, and the
country becomes increasingly industrialised.
Meanwhile, the Turkish agriculture sector is another large water consumer, and we forecast the industry to
continue to see strong growth and require large quantities of water for irrigation purposes, particularly in the
rapidly expanding sugar segment. A number of the largest government projects for the water sector are not
for municipal and domestic water supply and sanitation, but for irrigation of arable land.
However, since 1975, urban wastewater and drainage water are also used for irrigation (both treated and
untreated) - particularly in the dry central and south eastern provinces. Irrigation development is carried out
by the DSI, and by farmers' groups. The majority of the irrigation areas rely on surface water (almost 80%).
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As noted above, the OIC has launched a Food Security Foundation to encourage more efficient water usage
in agriculture while boosting overall production. The headquarters of the organisation are in Turkey,
emphasising how integral this water management development is to maintaining Turkey's own resources
while not antagonising its neighbours by consuming more than its fair share of irrigation waters. 'There is an
urgent need to address the twin institutional and operational gaps in the cooperation framework of OIC
countries in the domains of agriculture, rural development and food security,' said the organisation's
secretary general, Ekmeleddin Ihsanoglu.
Turkey might have to swap from hydropower generation to natural gas generation owing to the extremely
limited water supplies at presence in the wake of the drought. However, this will have a detrimental impact
on remaining water resources in some areas as natural gas requires a significant level of water consumption
for cooling purposes. In fact, there is now a drive to develop more conservative water consumption practises
for irrigation and energy generation. We believe this will stimulate renewed emphasis on water recycling
and drive investment into desalination and waste4water treatment facilities in Turkey. At present there is a
limited wastewater segment in Turkey and this represents a vast untapped resource.
Distribution
Around 3,000 municipalities are present in Turkey, most of which have a municipal water provider, though
the DSI continues to oversee bulk water supply processes for all cities of over 100,000 inhabitants. These
municipalities are also responsible for setting, charging and collecting tariffs.
The majority of Turkey's water suppliers are either wholly state-owned and managed, or partially privatised;
one example of this is the Build Operate Transfer (BOT) contract in Izmit between the local municipality
and Thames Water. The latter will cease to manage the water system in 2014 when its 15 year contract
ends. BOT contracts have seen a moderate popularity in Turkey.
Private sector participation in water supply and sanitation distribution is largely limited to operation of
water and wastewater treatment plants - though there have been some lease contracts such as that in Antalya
between ANTSU and the municipality. However, the operator was forced into liquidation as the partnership
was not a success.
However the companies are still struggling against cultural inertia with regards to bill paying and the
emphasis on bottled water. Although the majority of the population is connected to good quality drinking
water, even in rural areas, many still prefer bottled drinking water, and non-revenue water is still near the
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50% mark. However, although over 90% of the urban population is connected to sewers, only about 75% is
connected in rural areas, with the remainder relying on septic tanks.
Water losses continue to be the most significant of Turkey's issues with regards to the water sector. Recent
studies estimate that almost 160 days worth of drinking water are lost each year on the way to domestic
taps. Anatolia is one of the worst regions for this, with over 56% of drinking water lost or wasted over the
first 6 months of this year, while Istanbul saw 38% losses. The Ministry of Forestry and Waterworks
ascribes these high losses to a variety of factors including water being stolen through illegal pipelines, along
with a combination of inadequate or archaic infrastructure, and the recent severe droughts which have
resulted in a high level of evaporation.
Water Treatment and Sanitation
The majority of wastewater in turkey is discharged into the sea or the rivers. Over two thirds goes into these
sources. In our view, whether treated or untreated, this represents a significant wasted resource which could
be harnessed, particularly for industrial and agricultural consumers who could use low grade treated
wastewater. We view this as a key expansion area in the future, particularly as ground water supplies are
dwindling, as are the river waters in the Tigris and the Euphrates. Moreover there are ever-increasing water
security concerns and bilateral tensions between Turkey and its neighbours who also rely heavily on these
aforementioned rivers. This is currently exacerbated by the IS demands that turkey release more waters to it,
and the threat that the militant group could expand into Turkish lands in its search for necessary water
supplies it requires to establish a functioning caliphate.
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At present, the majority of Turkey's wastewater
treatment facilities are secondary level plants
(predominantly biological treatment methods).
Although this is improving, we believe that the
More Treatment Needed
Destination of Wastewater Discharged in
Turkey
country's endemic water pollution issues,
particularly from industrial pollutants, highlights the
need for further investment into this sector.
Additional legislation is also needed, and more
rigorously enforced penalties. For example, high
levels of arsenic have been found in the Ankara
water supplies, and despite numerous warnings from
officials, the municipality has not addressed the
issue.
We see opportunities for infrastructure companies
both in upgrading existing facilities and building
additional tertiary-level ones, but also in the
Source: National Statistics
construction of sewage collection networks, and
recycled water redistribution networks once water treatment facilities can produce it to a high enough
quality that it can become an additional municipal freshwater resource.
Table: Number of Wastewater Treatment Plants by Type
Number of wastewater treatment plants
460
Physical
57
Biological
244
Advanced
70
Natural
89
National Statistics,
Although urban sewage connections are above 95% and the overall access to some form of water network is
over 99% in most areas, Turkey has a number of pollution issues. A case in point is the recent uproar
concerning industrial dumping in Bafa where untreated factory waste is being dumped in the nearby lake.
Meanwhile, a fish farm is also releasing waste into the water and the problem is likely to become
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increasingly severe as there are plans for a second farm reportedly underway. Furthermore, the increasing
salinisation of the local river which feeds the lake has not only further degraded the lake's water quality, but
is also causing problems for nearby agricultural land. The local municipality is now considering emulating
the Izmir Water Company's practices as they recently undertook a vast clean-up project, requiring
massive investments into the water and wastewater treatment systems.
Water quality is frequently a problem due to salinity and waterlogging, caused by irrigation practices and
poor drainage systems. These issues increase gradually due to poor farming practices, lack of investment in
maintaining drainage systems, and the use of chemicals and pesticides in water which have resulted in high
levels of ground water pollution and eutrophication. Moreover polluted water is frequently used for
irrigation purposes, which intensifies the problem.
Meanwhile, the Istanbul Waterworks Authority (ISKI) has recently announced that raw sewage from the
village of Sazlibosna, in the Arnavutkoy district, has been polluting the 55mn m3 Sazlidere reservoir,
Istanbul's largest water reservoir, for at least a year now, due to a cesspool pit which has not been emptied
for over a year in conjunction with ancient leaking water infrastructure.
Equally, water pollution is also affecting the bottled water industry, as evidenced by recent scandals
surrounding the Ministry of Health announcement that 15 bottled water companies are selling unsanitary
water in violation of government health codes. This is likely to increase the pressure on the water sector to
provide clean potable water in the future.
Issues such as these have led to the Turkish Ministry of Environment and Urbanization's 'IPA
Environmental Operational Programme' (EOP). The programme aims to improve environmental protection
and living standards for the Turkish people by supporting investments in the environment infrastructure
sector in accordance with EU standards.
Water pollution levels are now the focus of government investment, with a large number of sanitation and
treatment plant projects underway, along with extensions of sewage networks and other projects having
received both government and international funding.
Regulations and Tariffs
Since the transfer of water irrigation responsibility to the DSI, Turkey has gained a much better record for
collection irrigation water charges - rising from below 40% to above 80%. The DSI prepares irrigation
water tariffs based on two factors - cost of operation and maintenance, and the extent of land that can
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irrigated. In order to further encourage payment, there are incentives for early payment sand substantial
penalties for delayed payments. Though water conservation is still an issue as the tariffs are not high enough
to encourage saving of water as yet.
The average municipal drinking water tariff averaged at 2TL per m3 in 2009. However, this has seen a
slight rise recently, although not enough to cover costs, particularly given the high level of bills which
remain unpaid. These residential tariffs are set by local governments, usually in increasing block tariffs.
Meanwhile, commercial and industrial users are set the highest block of the residential tariff.
Average tariffs in Turkey are on level with those in Spain, but higher than those in countries such as Italy
where political concerns have served to keep tariffs continuously depressed. However, there are only
limited charges for water abstraction and water pollution, which contributes to the ongoing problems
suffered by the country's water sector with regards to greater consumption than the natural resources can
bear on the one hand, and the persistent water pollution issues, particularly industrial water pollution
scandals. We believe that if tariffs for these two segments were instituted, not only would water
consumption be more sparing, and less likely to overburden limited resources, but if water treatment tariffs
and more stringent pollution fines were more widely applied, the overall water quality would greatly
improve, especially in industrial zones.
There is no single specific water law in Turkey, and no single institution controls the development of
policies for supply and sanitation. However the laws for environment and health are generally used to
regulate the sector as a whole, while at a regional and national level municipalities and various
organisations work together to form a general consensus - see the Competitive Landscape for more detail.
However, there is the 'Water Pollution Control Regulation' has provided extensive arrangements on water
quality management. This regulation ensures that the present quality of water resources should be protected
and improved. In this context, some regulations have been implemented related to protection areas around
drinking water reservoirs and protection of agricultural areas, some restrictions on discharging of domestic
and industrial wastewater have been imposed.
The country is also seeking to join the EU and therefore has to adhere to the rules of the Water Framework
Directive as well as the Urban Wastewater Treatment Directive and the Dangerous Substances Directive.
The Law Amending some Provisions of the Labour Code and other Decree Laws, number 29116 is now
implemented and forms part of the Law on Organization and Duties of General Directorate of State
Hydraulic Works. The amendment will cover construction works in the water sector and provide additional
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oversight of the quality of the works including Dam, regulator, head pond, tunnel, canal, water distribution
pipeline and other relevant water constructions of Hydroelectric Power Plants. Non-compliance may result
in the water use agreement being cancelled and a substantial fine.
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Industry Trends And Developments
Key Projects, Industry Trends & Developments
Overall, Turkey has an open trade and investment environment and actively encourages foreign
investment however waning investor interest is acting as a drag on FDI levels Turkey has seen a sharp dropoff in FDI into the water sector since 2012. In 2010 it had the third largest level of FDI into water
collection, distribution and purification, just behind the UK and the Czech Republic according to Trademap
statistics, while in 2011, it rose to second place (behind the Czech Republic). However since 2012, FDI into
the water sector has ceased and the country is now entirely reliant on governmental funding for its water
sector development projects. We attribute this to the large number of risk factors particular to Turkey which
are hindering the country's ability to attract FDI, such as an increased political risk profile and pronounced
macroeconomic imbalances.
We note that as many of Turkey's major infrastructure projects are heavily supported by Erdogan and his
administration, we expect the government will continue to throw its weight behind projects. The
government's efforts to assure infrastructure investor confidence have seemingly begun to have an effect.
Not only has the government been a key supporting factor in infrastructure development, it also contributes
heavily to investment within the construction sector. Government capital expenditure has made up a steadily
rising proportion of total gross fixed capital formation (GFCF), which as a key policy instrument of the
governing AKP party, and we expect this to persist. Private sector investment will continue to make up the
lion's share of total investment activity, but a higher contribution from the public sector will reduce
volatility in headline growth rates.
While over the short-term the government guarantees will provide potential upside to the construction
industry, our view is that the pressures Turkey has felt over 2013 and H114 will dampen the impressive
growth we saw in 2013 over the long term.
These pressures include:
■
The Turkish lira has suffered a major depreciation. In the face of mounting policy uncertainty and rising
US bond yields, project financing from domestic banks, who have been the main drivers of investment in
construction projects to date, will subsequently become more expensive as Turkish banks are heavily
reliant on international credit.
■
Should one of the mega-projects the Turkish government may guarantee the financial liabilities of fail which is not unrealistic given their size and intense public opposition in some cases - it would seriously
jeopardise Turkey's macro-economic progress in terms of reducing their sovereign debt. BMI's Country
Risk team echo our longer-term concerns with the view that government's debt guarantee is a net negative
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for all lira-denominated assets, as it will begin to erode investors' perception of sound macroeconomic
management by the government.
■
Prime Minister Erdogan's success in stifling corruption investigations - via mass purges of state
institutions and attempts to place the judiciary under direct control of the executive branch of government
- imply a worrying centralisation of power. This could damage perceptions of Turkish institutions in the
eyes of investors. Additionally, in light of the political tension over 2013 and continued protests, the
political environment in Turkey remains tense and we expect investors to adopt a wait-and-see approach.
Tunnel boring work at the 104MW Kargi hydropower plant in Corum province, Turkey, has been
completed. A tunnel boring machine broke through 7.8km of rock for the construction of the hydropower
plant. Gulermak bored seven bypass tunnels in the first 2km of boring to free the tunnel boring machine
(TBM) from collapsed ground. Another complexity was the small and wide faults along the alignment.
TBM modifications include a custom-built canopy drill and positioner, allowing pipet tube support
installation through the machine's forward shield.
Funding is coming from the government and from the EU, the UK, France, Germany, as well as various
other countries, companies and organisations. The Turkish government alone is estimated to have to invest
about USD2bn a year for water infrastructure projects currently in order to try and attain EU standards, and
the control of industrial water pollution entails an additional USD15bn of investments.
These projects include the inauguration of 36 dams as part of its wider water management and energy
development programmes. Costing over USD1.6bn, these dams form part of a wider and much needed
modernisation of the water sector. Additional projects will provide drinking water for towns and cities such
as Izmir, Van, Ordu, Karaman, Sinop and Aydin, as well as improving water storage for farmers and
increasing acreage for agricultural use. We see these developments as an extremely positive step towards a
more stable, coherent water sector infrastructure.
The European Bank for Reconstruction and Development (EBRD) is considering granting a TRY550mn
(USD260mn) secured loan to Turkish firm Enerjisa to develop the 280MW Alpaslan II dam and
hydropower plant in the province of Mus, Turkey. Turkey's Garanti Bank will contribute another
TRY550mn (USD260mn) towards the project. The estimated cost of the project is TRY1.69bn
(USD798.91mn). The hydropower project is scheduled to start operating in Q217.
Abengoa secured a project to develop a network of supply and sewerage pipelines to supply water and
sanitation to about 500,000 people in Denizli city, Turkey. The company will be responsible for the
engineering, design and construction work of the EUR35mn (USD47.84mn) project. Construction will
involve building a 250km supply, sanitation and drainage network, 30 wells and a Scada control system to
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optimise consumption and prevent energy and water loss. The company will also renovate existing deposits,
bore hole pumping stations and will operate and maintain the facilities for one year. Abengoa plans to
complete finish the project in 17 months and will not hold an interest in the assets. The project is likely to
create about 100 indirect jobs and 200 direct jobs during the construction phase.
Plan for additional dams in Turkey escalate tensions with neighbouring Armenia. The proposal for two new
reservoirs in eastern Turkey on rivers that run across the border into Armenia, the Kars and Aras rivers,
would reduce the downstream water available for domestic and agricultural consumption in Armenia. The
Ankara government has allocated USD20mn for the project so far, with completion due within five years.
However, perhaps the largest Turkish water project is the GAP of South Eastern Anatolia Project, which
includes 13 large developments across the Euphrates and Tigris rivers, and is designed to boost agriculture
in the country as well as improving healthcare and utilities services in the region. The project entails 22
damns, 19 hydroelectric plants, and the irrigation of around 1.8mn hectares of arable land.
Additionally, Turkey is home to the Anliurfa Irrigation Tunnels. The tunnels, constructed in connection
with the Southeastern Anatolia Project, are a multi-sector integrated regional development project. The two
parallel tunnels run in the Anliurfa Province of Turkey and deliver water from the reservoir of Ataturk Dam
on Firat River.
Grontnij was awarded a EUR5.5mn contract to prepare integrated water and wastewater projects for the
Ministry of the Environment and Urbanisation, partially funded by the IPA. Work started in January, and
will take around 30 months to complete.
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Table: Turkey Water Infrastructure Projects
Project Name
Adana-Iskenderun
Polypropylene Production
Facility
Value (USDmn) Capacity/
Length
Companies
1000
Bayegan,
Advanced
Petrochemical
Company
500000 tonnes
Forging plant, Dilovasi
district , Kocaeli Province
Bagistas II Hydroelectric
Power Plant, Erzincan
Timeframe
Status
Announced (May
2012)
Parsan Makina
Parcalari Sanayii
99
50MW
Unit Group
2009-2012
Completed
(December 2012
- Operational)
Hydropower PlantsEssentium Group
80
168MW
TSKB (Sponsor),
Essentium
2009Group
Under
construction
(The
hydroelectric
plants will be
built in Giresun,
Ardahan, Duzce,
and Kayseri.
Work expected
to be completed
in 2012)
Alkumru Dam - Construction
of a dam and a hydropower
plant in city of Siirt
465
265MW
Limak Group of
Companies
2008-2011
Completed
(Opened in May
2011)
Boyabat Hydropower Plant
on Kizilirmak River
Ilisu Dam and Hydropower
Plant on Tigris River, Turkey
1200
1640
513MW
Dogan Sirketler
Grubu, Dogus
Holding, Unit
Group
2008-2012
Completed
(Operational
since December
2012. Five
Turkish banks
had to fund
USD750mn)
1200MW
Temelsu, Stucky
Ltd, Rast
Constructions,
Maggia
Engineering,
Colenco, Alstom 2007-2014
SA, VA Tech
Hydro, Ed
Zublin, Cengiz
Insaat
(Holdings),
Nurol, Dolsar
Suspended
(January 2013Construction of
this dam project
has been
ordered to halt
by the Turkish
courts)
South-eastern Anatolia
Project (GAP) for construction
of dams and power plants on 32000
the Euphrates River and Tigris
River
7500MWMW
Borusan hydropower plants
350
250MW
Junction Dam and
hydropower Plant
172
103MW
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-2015
Under
construction
(The GAP also
consists of 19
hydroelectric
power plants
and 22 dams)
Borusan
2007-
Announced
(August 2007)
EnerjiSA Enerji
Uretim, AGE
2008-2012
Completed
(March 2011 Inaugurated)
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Turkey Water Report Q1 2015
Turkey Water Infrastructure Projects - Continued
Project Name
Value (USDmn) Capacity/
Length
Kargi Kizilirmak Hydroelectric
Project, Corum
Amasra coal fired power
plant, Bartin province
2400
Companies
Timeframe
Status
102MW
Statkraft,
Gulermak
2011-2013
Under
construction
(August 2012)
2640MW
Harbin Electric
International
(HEI), Hattat
Holding
2013-
Contract
Awarded (May
2013)
Power
machines(equip
ment), DSI
Kigi hydropower project,
Elazig province
Dogancay Hydroelectric
Project
Alpaslan II Dam and
Hydropower Plant, Mus
798.91
Denizili City water supply and 47.84
sewerage pipelines
62MW
Verbund,
Sabanci Holding
280MW
Garanti Koza,
EnerjiSA Enerji
Uretim,
European Bank
for
Reconstruction
and
Development
(EBRD)
a 250km supply,
sanitation and
drainage
Abengoa
network, 30
wells
In tender/Tender
launched (March
2014 - Enerji SA
Enerji Uretim AS.
seeks bids to
complete
construction and
hydromechanical
works)
-2017
Project finance
closure (April
2014)
2015-2018
Contract
awarded
*blank space = not available. Source: BMI
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Competitive Landscape
The water sector was formerly completely state owned. However, over the past few decades a certain
amount of market liberalisation has occurred and the state water company was broken down into
municipalities, which are either state or privately owned. A number of changes occurred following the
reorganisation of government ministries in 2011.
Overall, Turkey has an open trade and investment environment and actively encourages foreign
investment however waning investor interest is acting as a drag on FDI levels Turkey has seen a sharp dropoff in FDI into the water sector since 2012. We attribute this to the large number of risk factors particular to
Turkey which are hindering the country's ability to attract FDI, such as an increased political risk profile
and pronounced macroeconomic imbalances. These considerations are having an equally detrimental impact
on interest in maintaining and operating water utilities and infrastructure. A useful example of this is
Abengoa's contract to develop a network of supply and sewerage pipelines to supply water and sanitation in
Denizli, which does not involve a subsequent interest in the assets either ownership or operation.
Ministry of Forestry and Water Affairs, and Other Government Ministries
The Ministry of Forestry and Water Affairs, was established in June 2011. It is in charge of the prevention
of water resources pollution, environmental standards, permission and control, preparing the Environmental
Impact Assessment Report (ÇED), and planning the control projects for river basins. It now oversees the
following organisations:
■
General Directorate of State Hydraulic Works (DSI).
■
General Directorate of Water Management: responsible for creating policies focused on water resources
protection and creation of river basin management plans.
■
Turkish Water Institute.
Meanwhile, the Ministry of Health oversees the quality of potable water, spring water, mineral and healing
water, and the Metropolitan Municipalities continue to monitor the water and sewage administrations,
together with industrial wastewater discharge, and are involved in the creation of wastewater treatment
plants in their territories, which they subsequently maintain and operate.
State Hydraulic Works (DSI)
The State Hydraulic Works (DSİ) was created in 1954. It was absorbed by the Ministry for Forestry and
Water in 2011. DSİ is responsible for the planning, appropriation and development of water resources, as
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well as the monitoring, flood protection, planning and construction of the irrigation and hydroelectric
projects. The organisation also created the structure of the river basins which it operates through its 26
regional directorates in the river basins.
It is the main investment body for improvements to Turkey's water infrastructure, across agriculture,
industrial demands, electricity generation and domestic consumers. The DSI is also responsible for
providing water and wastewater services to all cities of over 100,000 people (as of the 2000 census, there
were 55 of these).
Municipalities
There are over 3,000 municipalities in Turkey, each of which should have a municipal water provider,
though the DSI continues to oversee bulk water supply processes for all cities of over 100,000 inhabitants.
These municipalities are also responsible for setting, charging and collecting tariffs.
There are also and 16 large municipal water works in the largest cities. One such is in Istanbul. The Istanbul
Water and Sewerage Authority (ISKI) was founded in 1981 and oversees water services to the Istanbul
Metropolitan Municipality. Its role includes managing water resources, providing potable water to the
public, and the collection and treatment of wastewater. The company is the largest water company in
Turkey and manages over 5,340km2, including water mains of around 15,586km in length and sewers
totalling 12,700km; 13 water treatment plants, with a daily combined capability of processing 3.6m3/d; and
15 wastewater treatment plants. The company is facing severe water shortages in January 2014, with water
reserves sufficient for less than 100 days, due to the unseasonably dry winter the region saw, with a
significantly reduced volume of rain and snow.
Another is in Ankara. The Ankara Municipality was created in 1949, but the Ankara Water and Sewerage
Authority (ASKI) was not founded until 1989. The company has since sought to protect water resources,
ensure good quality drinking water across the municipality and constantly repairs and upgrades its networks
and plants, the expansion of the municipal boundaries up to 2010 has necessitated a large number of
projects as the infrastructure had to be expanded to meet rising demand. Future projects include
constructing 54 new water storage facilities, 25 pumping stations, and the expansion of the municipality
distribution network.
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Global Industry Overview
BMI View: We believe that retailers, particularly those involved in food and drink production, will face
increasing risks with regards to water availability and pressures from environmental groups concerning the
overuse of water supplies. Retailers in both developed states and emerging markets will, in our view, need
to widen their investment portfolios to foster water resources in their supply chains, as well as undertaking
the development of water recycling and re-use facilities near their production zones.
This is vital not only because many food and drink retailers are major buyers of agricultural produce, and
are therefore vulnerable to risks stemming from water-driven yield and cost fluctuations, but also because
the subsequent production of food and drink goods often requires vast volumes of water.
Traditionally, many food retailers and other production companies (such as those involved in mining,
metals production and automotive manufacturing) have been reliant on local ground water supplies. In
emerging markets the use of these has been largely unregulated, with limited monitoring, which has
frequently resulted in 'free-for-all' attitude with more ground water resources consumed than can be restored
by natural rainfall. Not only has this resulted in a significant reduction in national water reserves in many
countries, but there is also a growing environmental backlash against perceived offenders, forcing
governments to implement new regulations and enforce punitive fines. Companies therefore not only face a
decline in water supplies, but new regulations and fines that can make projects and facilities unprofitable.
Many are also having to cope with tarnished public images. All these issues are costly to address.
One example of the pressures retailers are now facing can be found in fate of Coca-Cola's planned
expansion of its Mehdiganj factory near Varanasi in India. The company has had a facility there since 1999,
and has been using ground water supplies for most that time, at a faster rate than they could be replenished,
resulting in an overall drop in groundwater levels of 26 feet. This resulted in the company being accused of
overexploiting local resources, and there was substantial opposition to its planned USD25mn expansion of
the facility on environmental grounds. After more than a year of protests, a besmirched public image and
delay-induced losses, Coca-Cola abandoned the proposed expansion.
Companies will need to develop strategies that do not rely on ground water extraction to ensure sufficient
water supplies, both for their agricultural supply chains and for food and drink production facilities. This
will entail a sea change in the perception of water: instead of seeing it as a cheap and limitless item, it is a
valuable commodity which needs to be cultivated. We see three key strategies to cope with the rising
pressures which retail companies will face. These are:
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1. Funding water reservoirs, desalination facilities and wastewater treatment and distribution networks for
'their' farmers;
2. Acting as brokers for water supply projects, bringing together groups of farmers and factories in
investment consortia for mutual funding of water projects;
3. Building their own water recycling facilities (both wastewater treatment and desalination) near
production facilities.
An example of the first strategy can be seen in Asda's launch of a water scheme for its Spanish celery
growers. There are advantages to partnering food growers at the start of the supply chain. Not only do
partnerships reduce the risk of smaller crop yields in drought years but also, given the constant competition
for water resources between industrial and agricultural users, they provide a measure of protection from
protests and a reduced risk of the destruction of retailers' water supplies and water infrastructure. For
example, in Iran farmers destroyed the water pipelines they believed were diverting water supplies to
factories, while the aforementioned abandoning of the Coca-Cola expansion plan in India was partially due
to the complaints from the agricultural community concerning the 'over-extraction' of ground water
supplies.
There are, however, risks inherent in these strategies. The first and second strategies are of more benefit to
the initial agricultural producers rather than a company's production facility. Moreover both of these
investment options are only really economically viable if a company has long-term contracts with the
farmers, which is rarely the case.
The third option, of developing wastewater treatment and desalination facilities for specific production sites,
poses substantial cost risks, but we believe that overall it is the most practical and cost-efficient option, and
the one which provides the greatest security for companies. A number of companies are already moving
down this path and we expect more to follow. Evidence of the rising the trend for retailers to balance water
consumption and environmental concerns can be found in the USD43mn Nestlé set aside for water saving
programmes and wastewater treatment plants in 2013, and the substantial investments made by SABMiller
to repair and extend its water distribution networks in Tanzania to reduce losses and increase efficiency, as
well as improvements to one of its Indian facilities to boost available water supplies.
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More Investment Needed
Wastewater Treatment (mn cubic metres)
20,000
15,000
10,000
5,000
0
2012e
2013e
2014f
2015f
2016f
2017f
2018f
India - Total waste water, mn cubic metres
India - Treated discharged water, mn cubic metres
e/f = BMI estimate/forecast. Source: AQUASTAT, BMI
Overall, we expect that developments such as this will be increasingly common among retail producers.
This will boost wastewater treatment capacities in the beneficiary countries. We expect water re-use
practices in general to become increasingly common. At present they represent just a fraction of the overall
water consumed. In India, 32.6% of collected wastewater is treated, according to our data, and the volume
of wastewater collected represents less than 5% of all water consumed. Meanwhile, in Spain, only 12% of
treated wastewater is re-used, just over 600mn cubic metres a year. This indicates a vast relatively untapped
resource available to retailers, both for their agricultural producers and their manufacturing facilities, and
we expect food and drink retailers to drive developments in this sector.
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Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only
is the total population of a country a key variable in consumer demand, but an understanding of
the demographic profile is essential to understanding issues ranging from future population trends to
productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2015, the change in the structure of
the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show
indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split
and life expectancy.
Population
(1990-2050)
100
75
50
25
2050f
2045f
2040f
2035f
2030f
2025f
2020f
2015f
2010
2005
2000
1990
0
Turkey - Population, mn
f = BMI forecast. Source: National Sources/BMI
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Turkey Water Report Q1 2015
Turkey Population Pyramid
2015 (LHS) & 2015 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Table: Population Headline Indicators (Turkey 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
53,994
63,174
67,743
72,137
76,690
80,309
83,712
na
1.5
1.3
1.3
1.1
0.9
0.8
Population, total, male, '000
26,636
31,080
33,304
35,436
37,653
39,419
41,094
Population, total, female, '000
27,357
32,094
34,438
36,701
39,036
40,889
42,618
Population ratio, male/female
0.97
0.97
0.97
0.97
0.96
0.96
0.96
Population, total, '000
Population, % y-o-y
na = not available; f = BMI forecast. Source: World Bank, UN, BMI
Table: Key Population Ratios (Turkey 1990-2025)
Active population, total, '000
Active population, % of total population
Dependent population, total, '000
Dependent ratio, % of total working age
© Business Monitor International
1990
2000
2005
2010
2015f
2020f
2025f
31,966
40,022
43,994
47,789
51,655
54,475
56,784
59.2
63.4
64.9
66.2
67.4
67.8
67.8
22,028
23,151
23,748
24,347
25,034
25,833
26,928
68.9
57.8
54.0
50.9
48.5
47.4
47.4
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Turkey Water Report Q1 2015
Key Population Ratios (Turkey 1990-2025) - Continued
Youth population, total, '000
1990
2000
2005
2010
2015f
2020f
2025f
19,574
19,363
19,306
19,262
19,128
18,594
18,032
61.2
48.4
43.9
40.3
37.0
34.1
31.8
2,453
3,788
4,442
5,085
5,906
7,238
8,895
7.7
9.5
10.1
10.6
11.4
13.3
15.7
Youth population, % of total working age
Pensionable population, '000
Pensionable population, % of total working age
f = BMI forecast. Source: World Bank, UN, BMI
Table: Urban/Rural Population & Life Expectancy (Turkey 1990-2025)
1990
Urban population, '000
2020f
2025f
31,966.4 40,899.8 45,280.1 50,847.6 57,593.8 63,140.1
68,006.7
Urban population, % of total
Rural population, '000
2000
59.2
64.7
2005
66.8
2010e
70.5
2015f
75.1
78.6
81.2
22,028.2 22,274.7 22,462.9 21,290.0 19,096.7 17,169.4
15,706.2
Rural population, % of total
40.8
35.3
33.2
29.5
24.9
21.4
18.8
Life expectancy at birth, male, years
60.7
66.4
69.1
70.8
72.5
74.1
75.6
Life expectancy at birth, female, years
68.0
73.8
76.0
77.8
79.2
80.5
81.6
Life expectancy at birth, average, years
64.3
70.0
72.5
74.3
75.9
77.3
78.7
f = BMI forecast. Source: World Bank, UN, BMI
Table: Population By Age Group (Turkey 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, total, '000
6,648
6,570
6,467
6,358
6,309
6,031
5,821
Population, 5-9 yrs, total, '000
6,649
6,368
6,509
6,424
6,378
6,238
6,009
Population, 10-14 yrs, total, '000
6,276
6,425
6,329
6,478
6,440
6,324
6,200
Population, 15-19 yrs, total, '000
5,644
6,460
6,370
6,290
6,480
6,387
6,288
Population, 20-24 yrs, total, '000
4,904
6,097
6,392
6,321
6,274
6,429
6,352
Population, 25-29 yrs, total, '000
4,362
5,469
6,032
6,339
6,298
6,225
6,389
Population, 30-34 yrs, total, '000
3,859
4,756
5,408
5,978
6,309
6,242
6,183
Population, 35-39 yrs, total, '000
3,288
4,227
4,697
5,352
5,943
6,246
6,194
Population, 40-44 yrs, total, '000
2,498
3,728
4,167
4,639
5,314
5,874
6,189
Population, 45-49 yrs, total, '000
2,141
3,154
3,662
4,102
4,595
5,237
5,805
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Turkey Water Report Q1 2015
Population By Age Group (Turkey 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
Population, 50-54 yrs, total, '000
1,966
2,368
3,081
3,587
4,048
4,509
5,157
Population, 55-59 yrs, total, '000
1,892
1,991
2,289
2,991
3,515
3,943
4,410
Population, 60-64 yrs, total, '000
1,408
1,767
1,890
2,186
2,876
3,380
3,814
Population, 65-69 yrs, total, '000
958
1,610
1,623
1,753
2,051
2,715
3,207
Population, 70-74 yrs, total, '000
598
1,090
1,393
1,423
1,567
1,854
2,483
Population, 75-79 yrs, total, '000
510
619
844
1,099
1,154
1,300
1,571
Population, 80-84 yrs, total, '000
266
283
396
559
756
820
959
Population, 85-89 yrs, total, '000
93
142
134
197
296
418
476
Population, 90-94 yrs, total, '000
23
36
42
44
69
112
168
Population, 95-99 yrs, total, '000
2
4
6
7
8
15
26
Population, 100+ yrs, total, '000
0
0
0
0
0
1
1
f = BMI forecast. Source: World Bank, UN, BMI
Table: Population By Age Group % (Turkey 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, % total
12.31
10.40
9.55
8.82
8.23
7.51
6.95
Population, 5-9 yrs, % total
12.32
10.08
9.61
8.91
8.32
7.77
7.18
Population, 10-14 yrs, % total
11.62
10.17
9.34
8.98
8.40
7.88
7.41
Population, 15-19 yrs, % total
10.45
10.23
9.40
8.72
8.45
7.95
7.51
Population, 20-24 yrs, % total
9.08
9.65
9.44
8.76
8.18
8.01
7.59
Population, 25-29 yrs, % total
8.08
8.66
8.91
8.79
8.21
7.75
7.63
Population, 30-34 yrs, % total
7.15
7.53
7.98
8.29
8.23
7.77
7.39
Population, 35-39 yrs, % total
6.09
6.69
6.93
7.42
7.75
7.78
7.40
Population, 40-44 yrs, % total
4.63
5.90
6.15
6.43
6.93
7.31
7.39
Population, 45-49 yrs, % total
3.97
4.99
5.41
5.69
5.99
6.52
6.93
Population, 50-54 yrs, % total
3.64
3.75
4.55
4.97
5.28
5.61
6.16
Population, 55-59 yrs, % total
3.50
3.15
3.38
4.15
4.58
4.91
5.27
Population, 60-64 yrs, % total
2.61
2.80
2.79
3.03
3.75
4.21
4.56
Population, 65-69 yrs, % total
1.78
2.55
2.40
2.43
2.67
3.38
3.83
Population, 70-74 yrs, % total
1.11
1.73
2.06
1.97
2.04
2.31
2.97
Population, 75-79 yrs, % total
0.95
0.98
1.25
1.52
1.51
1.62
1.88
Population, 80-84 yrs, % total
0.49
0.45
0.59
0.78
0.99
1.02
1.15
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Turkey Water Report Q1 2015
Population By Age Group % (Turkey 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
Population, 85-89 yrs, % total
0.17
0.23
0.20
0.27
0.39
0.52
0.57
Population, 90-94 yrs, % total
0.04
0.06
0.06
0.06
0.09
0.14
0.20
Population, 95-99 yrs, % total
0.00
0.01
0.01
0.01
0.01
0.02
0.03
Population, 100+ yrs, % total
0.00
0.00
0.00
0.00
0.00
0.00
0.00
f = BMI forecast. Source: World Bank, UN, BMI
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Turkey Water Report Q1 2015
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case determined, as per standard practice, by the prevailing features of the industry data being examined.
Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a
variable using more than the variable's own history as explanatory information. For example, when
forecasting oil prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historical data or data
quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a
basis for analysis and forecasting.
BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use
of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple
non-linear models, such as the log-linear model, are used when necessary. During periods of 'industry
shock', for example poor weather conditions impeding agricultural output, dummy variables are used to
determine the level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
■
R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
■
Testing the directional movement and magnitude of coefficients;
■
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
■
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity.
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BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
Our Water forecasts cover a range of variables and indicators. These are divided into three groups:
■
Water extraction (total volume mn cubic metres; household and per capita extraction; sources of water
extraction);
■
Water consumption (total volume in mn cubic metres; household and per capita consumption; total
consumption and mains water consumption; population connected to mains water; population with access
to drinking water);
■
Water treatment (total volume of wastewater, treated waste water, untreated wastewater, and manner of
treatment in mn cubic metres);
■
Water sanitation (population and households connected to sewer networks).
Within the water industry, human intervention in the forecasts might include, but is not exclusive to:
■
Business environment changes;
■
Domestic or regional trends changing;
■
Demographic factors;
■
Infrastructure investments;
■
Macroeconomic indicators;
■
Regulatory changes;
■
Tariffs.
Moreover, these reports and their forecasts have made full use of BMI's Key Projects Databases for each
country, in most cases dating back to 2005. This allows us to calculate historical ratios between general
industry value and its sub-sectors, which we then use for forecasting. Our Key Projects Tables are
not exhaustive, but they are comprehensive enough to provide a solid starting point for our calculations
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Sources
We use publicly available data sources, prioritising national level sources (national banks, government
ministries, and industry associations). Where gaps in our data occur we use multilateral organisations or
global industry associations. We also use data from these sources to benchmark and check local sources.
We also use company information to provide bottom-up market size data and to assist with short-term
forecasting and assessing market sentiment. In some instance, where full time series data is not available,
we use a combination of the above, coupled with industry expertise, to model industry data.
Risk/Reward Index Methodology
BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market.
The RRI system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
■
Industry Rewards. This is an industry-specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors.
• Country Rewards. This is a country-specific category, and the score factors in favourable political and
economic conditions for the industry.
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
■
Industry Risks. This is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market.
• Country Risks. This is a country-specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score.
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
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For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Index a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by BMI to be 'emerging markets', our score is revised on a quarterly
basis. This ensures that the score draws on the latest information and data across our broad range of sources,
and the expertise of our analysts.
Sector-Specific Methodology
In constructing these indices, the following indicators have been used. Almost all indicators are objectively
based.
Table: Water Risk/Reward Index Indicators
Rationale
Rewards
Industry Rewards
Total water extraction, litres per
household per day
Availability of water for domestic and industrial users
Total water consumption, litres per
person per day
Efficiency of distribution networks and environmental awareness of consumer
Total waste water as % of total water
extraction
Volume of wastewater collected in sewage networks as opposed to
discharged, untreated, directly into nearby rivers
Treated discharged water, % of total
waste water
Size and efficiency of sanitation sector
Population connected to mains water
supply, %
Population connected to sewer network,
%
Country Rewards
Population, mn
Bigger population good, as more need for investment in water
Population, 5-year CAGR, %
Population growth bad, as puts greater strain on limited infrastructure
Households, 5-year CAGR, %
Household growth bad, as puts more strain on limited infrastructure
Risks
Industry Risks
Water infrastructure real value growth
Real value growth in water infrastructure is good for water sector
Water infrastructure real value,
USDmn
Shows size of sector
Regulatory environment, out of 10
Subjective score based on the industry-specific regulatory environment and
the presence of potentially restrictive legislation.
Country Risks
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Water Risk/Reward Index Indicators - Continued
Rationale
Road and waterways
(transport infrastructure)
From BMI's Country Risk Index (CRI). Poor power/water/transport
infrastructure act as bottlenecks to sector development
Power proxy
(business infrastructure)
Denotes ease of doing business in the country
Corruption
Denotes risk of additional illegal costs/possibility of opacity in tendering/
business operations affecting companies' ability to compete
Openness to investment
Score from CRI to denote ease of conducting business in the state
Government intervention
Denotes predictability of policy over successive governments
CAGR = compound annual growth rate. Source: BMI
Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. The following weighting has been adopted:
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Table: Weighting Of Indicators
Weighting, %
Rewards
60, of which
Industry Rewards
70, of which
Total water extraction, litres per household per day
17
Total water consumption, litres per person per day
17
Total waste water as % of total water extraction
17
Treated discharged water, % of total waste water
17
Population connected to mains water supply, %
17
Population connected to sewer network, %
17
Country Rewards
30, of which
Population, mn
33
Population, 5-year CAGR, %
33
Households, 5-year CAGR, %
33
Risks
40, of which
Industry Risks
40, of which
Water infrastructure real value growth
33
Water infrastructure real value, USDmn
33
Regulatory environment (out of 10)
33
Country Risks
60, of which
Road and waterways (transport infrastructure)
20
Power proxy (business infrastructure)
20
Corruption
20
Openness to investment
20
Government intervention
20
Source: BMI
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