Türkiye

Metro, Istanbul, Turkey — © Mathias Depardon / AFD

A major player on the regional scene, Türkiye has experienced rapid development and transformations in recent decades, creating new opportunities, but also major imbalances. Its challenge today: to combine rapid growth with fair and sustainable development. AFD Group and its local partners in Türkiye are working for more balanced and sustainable growth, as well as a transition to a lower carbon economy.

Context

An emerging country of 84 million inhabitants, endowed with a young and urbanized population, Türkiye is the 19th economic power in the world. It enjoys a strategic position at the geographical and historical crossroads of Eastern and Western civilizations, one foot in Asia, another in Europe. Its relations with France are old and manifold and there is strong interdependence between Europe and Türkiye.

Economic growth, which was rapid in the early 2000s, has been running out of steam for several years. It is the result of sustained demand, driven by the construction sector, major infrastructure and shopping centers, and household consumption, and it is fueled by a dynamic distribution of bank loans.

This development model is now showing its limits in terms of sustainability, with the deterioration of economic indicators: currency depreciation, inflation, a fall in purchasing power, household debt. As the 16th highest emitter in the world of greenhouse gases, while at the same time being home to a unique biodiversity, the impact of economic growth on the environment are visible (large fires, marine pollution, deadly floods).

Before the health crisis, political tensions and the Syrian crisis had already affected Türkiye and reduced its ability to attract tourism and international investment. To meet these challenges, the country has embarked on the path of more balanced growth.

Present since 2004, AFD Group supports Türkiye's efforts to ensure fair growth that respects the environment and takes climate issues into account, thanks to loans to the State, local authorities, companies and banks. The search for shared interests between France and Türkiye, mitigation and adaptation to climate change and equality between women and men constitute the common denominator of the projects financed by the Group in Türkiye. Accredited to manage European funds, AFD also contributes to European support for Turkish institutions in the management of refugees (European Union Facility for Refugees in Türkiye).

In total, we have committed €5 billion in Türkiye since 2004.

AFD's Türkiye office is directly attached to the Eurasia regional office.

Our approach

"AFD and Türkiye: Supporting the transition towards a more inclusive and low-carbon economy"

Türkiye experienced a period of rapid urbanization until the 2000s. From transportation, water, sanitation and waste management, to the management of natural areas, the challenges are substantial for the 30 Turkish municipalities that now host 80% of the population.

Cities are both part of the cause of and are vulnerable to the ecological transitions currently under way worldwide. They are also best able to act at the territorial level, in accordance with their mandate.

AFD aims to support these municipalities, both technically and financially, so that they can offer efficient urban public services accessible to all, respectful of the environment and adapted to climate issues.

AFD finances the largest municipalities and their urban service operators who have the capacity to borrow independently, and medium-sized towns via banking intermediation, notably in partnership with Ilbank, the local authority bank. It also mobilizes external funds, delegated for example by the European Union. This makes it possible to finance investments in sustainable urban infrastructure, and to support capacity building through technical cooperation. This can take the form of financial management of cities through the diversification of revenues, planning capacity and managing investments not least with an eye to mitigation and adaptation to climate change.

The evolution of Turkish energy consumption is a major part of its carbon footprint. It has obtained remarkable results in terms of the development of renewable energies and energy efficiency thanks to an incentive tariff policy.

Turkey's desire to commit to a zero emissions target by mid-century should materialize through the establishment of a long-term energy transition strategy, in a context where investment in this sector is mainly private.

AFD continues to support this positive agenda, by offering to support strategic and methodological reflection, and by studying the financing of public investments to improve the share of renewable energies, in particular those requiring technological innovations and partnerships with French players, in order to prepare the way for market financing.

It continues to promote, improve and expand the building of energy-efficient buildings, through the financing of projects for public buildings, and lines of credit for private buildings, thereby incentivizing the banking sector to offer green housing loans.

Over the past decade, AFD has supported Türkiye in the management of its forest stock, almost entirely in the public domain, for the purposes of climate change adaptation and mitigation. In the years to come, AFD wishes to continue this support by integrating a strong biodiversity component. Turkey has indeed an exceptional but also threatened natural capital.

Studies of sustainable agriculture, management of natural areas, water and wetland management, and the enhancement of the blue economy, launched in 2022, should allow Türkiye to establish clear priorities and funding planning for its biodiversity in the coming years.

This funding may take the form of sovereign projects, public policy loans or bank credit lines, in support of sustainable agriculture, energy efficiency and the preservation of natural resources – all of which can be beneficial for employment.

Given that metropolitan municipalities can often contain large rural areas, this can also be part of the support for local authorities.

Two societal themes remain important within AFD's activities in Türkiye: equality between women and men and improving the reception of refugees.

Work on employment equality is carried out with the TSKB bank, especially on the offer of childcare – one of the main conditions for the return of women to work after a first child.

AFD is also continuing to support regions hosting many refugees fleeing the Syrian crisis, for example by financing the improvement of water and sanitation infrastructure and the construction of a hospital, especially through the implementation of the European Union Facility for Refugees in Turkey. Synergies with Expertise France, already active in this European funding, will be sought.