Turkish motorways on European money. How Erdogan's home companies are building Romania's roads

Ioana Epure

English Section

01/12/2023

Why and with what consequences? PressOne asked.

READ PART TWO OF THIS ARTICLE HERE

In February 2021, the Government of Romania was preparing to eliminate Turkey and China from public tenders for billion-euro infrastructure projects. Of the two countries, only China was eventually excluded, four months later. The Romanian authorities feared that Asian construction firms might not comply with European standards and that Romania could face delays just as when the demand for roads and railways is at its highest. But Turkey has been protected by its status as a country in the process of joining the European Union, which it has had since October 2005.

The consequence? If between 2019-2021 only the Turkish companies Aksim Alarko - part of the conglomerate Alarko Holding, which won in 2019 the tender for a section of the Bucharest Ring Road (and subsequently won a second one), and Nurol, which won in 2020 a section of the Transylvania motorway, Suplacu de Barcău (Bihor) - Nușfalău (Sălaj), now their number has increased fivefold.

As of November 2023, at least 10 Turkish companies have won tenders for large infrastructure projects in Romania, some of them of vital importance, such as the most difficult segment of the A1 motorway or the 300 km pipeline that will transport natural gas from the Black Sea. Among them: Cengiz, Alsim Alarko, Mapa, Yapi Merkezi, Gülermak, Kalyon, Makyol, Özaltın and İlci and Kalyon. Even more than that have participated but not won - yet.

Romania has allocated more than 40 billion RON in the last decade for road infrastructure. 8.4 billion was spent in 2022 alone, a record for investment in road construction and maintenance. Yet Romania's motorway network has barely passed the psychological threshold of one thousand kilometres (1,004 km of motorways and expressways, 33 years after the Revolution), well below Hungary or Croatia.

This is when the companies considered to be the Erdogan regime's house firms enter the scene.

What major infrastructure projects are Turkish companies building in Romania

For many of these Turkish companies, Romania is an entryway to the EU market. But in Turkey, grand plans to reshape the country through infrastructure are hurting the environment and, in some cases, even human lives for Erdogan's political capital.

Alsim Alarko is the company responsible for the design and execution of the Bucharest South Ring Road, Lots 1 and 2. The initial deadlines were September and May 2023 respectively. Neither of the two lots has been commissioned yet.

Two Turkish builders, Makyol and Alsim Alarko, have won the tender for the first section of the M6 Metro, which will link 1 Mai/M4 and Băneasa (Tokyo station). Section 2 will be built by the same company that will also build the light rail in Cluj-Napoca: Gulermak. Total value of the two contracts: 2.5 billion RON. Gulermak Holding has similar projects in Turkey, Poland, India and Bahrain.

Alarko Holding, Alsim Alarko's parent company, has so far not worked on any major infrastructure project in Europe, but only in Turkey and Kazakhstan. Their portfolio includes part of the Istanbul metro and the Almaty ring road (Kazakhstan).

Mapa builds, together with Cengiz, the A1 Sibiu - Pitesti motorway, Section 2: Boița - Cornetu, one of the most difficult and complicated stretches of motorway in Romania.

In the EU, Mapa built the Sofia ring road and a waste treatment plant in Bulgaria. Elsewhere, Mapa has large infrastructure and building projects (motorways, airports, hotels, power plants and water treatment plants, plus other industrial buildings) only in third countries: Albania, Algeria, Azerbaijan, Egypt, Georgia, Ghana, Jordan, Mongolia, Saudi Arabia or UAE. Cengiz have also built in Turkey, Kazakhstan, Bosnia Herzegovina or Bulgaria.

Nurol is building, together with Makyol, the Ploiești - Buzău motorway, lot 3 Pietroasele - Buzău and has just completed part of the Brașov - Târgu Mureș - Cluj - Oradea motorway, subsection Nușfalău - Suplacu de Barcău.

They also have other road infrastructure projects in countries such as Turkey, UAE, Algeria, Saudi Arabia, Turkmenistan, Iraq, Morocco, Russia and Afghanistan.

Ilci Holding, a company that also has road infrastructure projects in Turkey and Georgia, will build the ring road in Sighisoara in a joint venture with several companies, including a cleaning company: S.C. Clean Prest Activ SRL, which, among other things, cleans Otopeni airport.

Yapi Merkezi is building in Romania the Sibiu - Brasov motorway, Section 4, Sâmbăta De Sus - Făgăraș Municipality. The tender was won in a joint venture with Makyol and in competition with another Turkish company, Mapa. They will also be in charge of a series of a series of repairs funded through NRRP funds for the CFR Bucharest - Craiova main railway line, over a total length of 46 kilometres.

Yapi is building currently in Turkey, Tanzania, Ethiopia, Sudan, UAE and Morocco, but also has a rail infrastructure project in Slovenia and the future BMW plant in Debrecen, Hungary, which should be ready in 2025.

Ozaltin Holding will be in charge of the so-called "Ford Highway" - the Craiova-Balș expressway. They have similar projects in Turkey, Libya, Saudi Arabia and Belarus.

Makyol Group won the tender for the Sibiu - Făgăraș motorway, (on some of the lots in association with Kolin and Mapa, among others), but also the Ploiești - Buzău, Pietroasele - Buzău motorway (in association with Nurol). Together with Alsim Alarko, Makyol Group will build the first six metro stations connecting to Henri Coandă airport. Other construction projects have been executed in countries such as Albania, Algeria, Azerbaijan, Kazakhstan, Kuwait, Morocco, Iraq and Oman.

Turkish giant Kalyon will build the pipeline through which Romania intends to transport natural gas extracted from the Black Sea into the national and European network. Construction cost: 1.61 billion RON.

Most of these companies have not executed projects in EU countries at all, but only in non-EU countries in the Balkans, Asia or the Middle East (Afghanistan, Kazakhstan, India or Iraq, among others).

In the case of those who have entered the European market, the two countries where they have won a significant number of projects (incomparably fewer than in Romania) are Hungary and Poland. Only in 2022, Turkish companies won large infrastructure projects worth $1.5 billion euros in Romania, $936 million in Poland and $649 million in Hungary.

Why are Turkish companies building in Romania? "Other serious entrepreneurs said that the projects are insufficiently prepared to afford taking risks on them"

Laurențiu Plosceanu, president of the Romanian Association of Construction Contractors (ARACO), explains to PressOne that the emergence of the Turkish companies came precisely in the context in which Chinese companies were banned from participating in tenders for EU money or state budget funds. But, he adds, another factor was added to this favourable context: the very low price offered by Turkish companies.

"For many projects, tenders were made with outdated prices, in the context of consistent price escalation, which meant that European or Romanian contractors could not afford to take risks on the projects. From the beginning it was clear that the prices were not in line with the realities of the moment."

For the president of ARACO, Turkish construction companies have taken advantage of "a window of opportunity" created by the slowness with which the Romanian government issued decisions that could update prices. Once they enter the local construction market, Turkish firms will strengthen their position. "It's not the first time they've tried this," adds Laurențiu Plosceanu, who reminds PressOne of the failure of Eko on the Bacau Ring Road, a company that in 2017 went bankrupt after building only 3% of the project.

But why did these companies prefer Romania as a gateway to the European Union? "First of all, there's a principle that says 'follow the money'," answers Laurențiu Plosceanu. "Here there are projects with funding."

However, the ARACO president claims that there is also a political interest motivating the entry of Turkish companies into the Romanian market, more precisely "a political interest in extending the economic presence to the borders of the former Ottoman Empire. That's why you will find Turkish companies in Bosnia and other countries that have been in their area of control in the past."

The giant Cengiz, which has carried out projects in Bosnia-Herzegovina, is an example of this, as well as Mapa or Makyol, which are present on the Albanian market. In June 2023, Ozaltin was even disqualified from participating in a public tender in Bosnia and Herzegovina for the construction of a motorway tunnel, for allegedly submitting false documents.

"It remains to be seen whether they will be able to perform under the terms of the contracts they have signed," adds the ARACO president.

Turkish builders, more appetite for risk. "At the slightest political problem in their country, they will throw the contracts signed in Romania out the window"

"Turkish companies have got their hands on major contracts, absolutely essential", Ionuț Ciurea, president of the Pro Infrastructura association, tells PressOne.

"At the slightest political problem in their country, they will throw the contracts signed in Romania out the window without any hesitation," he believes, referring to the close ties between these companies and President Erdogan, a relationship that would directly influence their ability to complete the projects they win.

However, the success of Turkish companies in public tenders in Romania is also facilitated by Romania's legislative, economic and political context, which generates risks that European companies refuse to take, either because they are listed on the stock exchange, or because bidding low prices can be problematic, as many feasibility studies do not match the reality on the ground, says Ionuț Ciurea.

"They win because they meet two conditions. One, they have a much higher appetite for risk. When you're operating in a free market, when you're listed on a stock exchange (as most EU companies are, editor's note), you can't do just everything you want, can you? The moment you're drawing your sap from Erdogan's deep pockets, you can take a risk in certain markets if it comes to termination because you've priced it too low, because what's on the ground doesn't match what's in the feasibility study."

There are many situations in Romania where there is a significant difference between the feasibility study or technical documentation provided by CNAIR and the reality on the ground, adds Ionuț Ciurea.

The reason why other builders have given up? The old and poorly drafted feasibility study, which did not match the reality on the ground, and which alarmingly increased the risks that they would have taken at the start of construction.

Alin Șerbănescu, spokesman for National Road Company at the time, said in an interview with PressOne that this was just an excuse that the other bidding consortia, all from the EU, used to hide their lack of preparation for the project.

Laurențiu Plosceanu, president of ARACO, confirms for PressOne that there are specific conditions in Romanian legislation that do not appear in the legislation of other Member States and that are difficult for builders to manage, from the perspective of contract performance:

"Now that we are facing very long delays in the payment of claims, which obviously creates problems in their management, from the perspective of maintaining resources on projects, from the perspective of securing materials on those on projects. There is a lot of uncertainty about how these projects will be funded in the coming months."

In addition, the fact that project values are not updated creates further barriers for less risk-averse builders:

"Many times they go on project values that are not updated and a serious contractor cannot take risks when it is clear that those prices are 5 years, 10 years out of date. Economic behaviour is normal. There must be a mechanism for updating prices, including on those feasibility studies that were done a long time before," adds the ARACO president.

Are there any concerns about the quality of construction, environmental impact or safety on Turkish companies' construction sites?

The Gang of Five. "All thanks to you, high authority". How President Erdogan is building his influence in Romania and the world through companies loyal to the regime

At the opening ceremony of a new section of the Marmara motorway on 19 September 2020, President Recep Tayyip Erdoğan appeared on a giant screen set up on a stage. In front of the screen, lined up on the podium, were the owners of construction companies Cengiz, Limak and Kalyon.

According to reports in the Turkish media, upon hearing his name called by the president, Cemal Kalyoncu, CEO of Kalyon Group, reportedly stepped forward and, hand on heart, saluted the huge screen, expressing his gratitude and on behalf of his partners, saying: "All thanks to you, high authority."

In the Turkish press, the companies Cengiz, Limak, Kalyon, Kolin and Makyol are known as " of Gang of Five": the companies closest to President Erdogan (though by no means the only ones). In its 20 years in power, Erdoğan's party has introduced over a hundred amendments to public procurement laws (some sources say more than 200 amendments), making it easier for him to award public procurement contracts to companies close to him, including these (although in reality we are talking not just about five companies, but rather a group of almost 20).

In a bill tabled in March 2022 by 85 AKP MPs, a ban on news that questions the work of construction companies was proposed, under threat of a prison sentence of between 1 and 3 years. Although the bill does not explicitly refer to these companies, the opposition claimed that the purpose of the bill was to protect the so-called "gang of five" companies.

A report by the CHP (Turkey's main party of position) claims that 50% of all tenders organised in Turkey have been won by these companies, which have been accused of corruption by the Turkish opposition several times over the years. Some sources, citing a World Bank report, claim that these companies have won the most public tenders in the world over the past decade. Some of them were implicated in the December 2013 investigation into fraud, corruption and tax evasion that stemmed from the purchase of a media group to serve as the government's mouthpiece.

Even in this context, however, international relations experts consulted by PressOne argue that Romania cannot afford to have bad relations with Turkey. The European Commission has also provided a point of view at the request of the editorial office.

Details of the Erdogan regime's attempted economic expansion into Central and Eastern Europe through Romania, and how Turkish construction companies have become tools of the Ankara regime, in the next article in this series.

READ PART TWO OF THIS ARTICLE HERE

This text is part of a series of articles proposed by TEFI, a cross-border editorial project developed by some of the most powerful editorial offices in Central and Eastern Europe: Gazeta Wyborcza (Poland), Magyar Jeti / 444 (Hungary), SME (Slovakia), Bellingcat (Netherlands), PressOne (Romania), united in a consortium financed by European funds and which aims to promote national and regional security issues.