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Market News

 August 14, 2007
Turkey: Water and Wastewater

 There is a potentially strong market for water and wastewater technology products in the rapidly developing Turkish market. Turkey, despite having a rather strong environmental law, has not been able to implement environmental protection measures until recently, due to the scarcity of resources and the developing nature of the economy.

However, with the start of the accession talks with the European Union, Turkey has adopted a new environmental law to initiate the harmonization of its environmental regulations with EU standards. Alignment with the EU standards is creating an environmental infrastructure and technologies market that will ultimately be worth 70.5 billion. The alignment is planned for completion by 2024. Fifty percent of the investment total is earmarked for the water sector.

Market Demand

Turkey is one of the fastest growing economies in the world; this is a result of many factors. Turkey has:

  • A young population composed of 70 million people with a rising consumption level,

  • real GDP growth at an annual average of seven percent since 2003, which is expected to continue in the coming years,

  • growing industrial production and new industrial investments,

  • decreasing inflation and interest rates which trigger investments,

  • an increasing level of Foreign Direct Investment which reached $20 billion in 2006, and

  • active participation in international trade, with an export volume of $73 billion and an import volume of $116 billion in 2005.

With increasing industrial output and rapid urbanization, which is expected to reach the European Union (EU) average by 2015, environmental protection issues have become highly controversial in Turkey. On the one hand, the state and the local authorities are trying to protect the environment with the limited resources they have; on the other, the industrialists are trying to grow their businesses in a competitive environment and do not always take standards for environmental protection seriously. This has been the vicious circle the Turkish environmental market has been in until lately.

Environmental protection has been on the agenda of successive governments since 1972, when Turkey first included environmental protection measures in its third five-year development plan. The first environmental law was passed by Parliament in 1983, and the Ministry of Environment was established in 1991. In 1998, the country announced its 'National Environment Strategy and Action Plan,' which specified that a protected environment is a prerequisite for a developing economy. Turkey signed eleven international treaties on environmental protection between 1992-2002.

Environmental protection issues have become a hot issue in the country's agenda. This was mainly triggered by the start of the accession talks between Turkey and the EU in 2005. The environment is one of the thirty-five chapters that Turkey must negotiate with the EU. The regulatory harmonization with the EU is scheduled for completion by the end of 2010. The Turkish Parliament has taken the first step toward harmonization by passing a new 'Environmental Law' in April 2006.

On the investment side, harmonization with the EU will necessitate 70.5 billion in the coming twenty years. 68 billion of this volume would be spent on capital investment and the rest would be spent on technical support programs and personnel expenses. The total investment value may increase to 90 billion when the investments required by the 'chemicals directive' are added to the total picture.

The amount that would be spent by the state on capital investment would be 50 billion, whereas the private sector would spend 18 billion. The largest portion of this chain of investment, 35 billion, would be for wastewater and drinking water facilities. This would be followed by investment in solid waste management and prevention of air pollution.

When looking at these figures, it is clear that larger portion of the investments to be made by both public and private entities will be on water and wastewater treatment. As urbanization and industrialization take their toll, problems and needs related to better and more efficient usage of water resources will become more critical.

Currently, annual water use per capita is around 1,500 m3, but in 20 years as the population approaches 90 million people, this amount is expected to go down to 1,042 m3; internationally, 1,000 m3 is accepted as the threshold for the alarm bells to ring. An increase of around 33 percent in the amount of water drawn from surface and groundwater resources between the years 1995 and 2002 shows that there will be increased pressure on resources in order to meet water demand.

Discharge of sewage and wastewater into surface water without treatment by industrial facilities is also a major problem. There are 87 organized industrial zones in Turkey, but only 41 of them have operating water treatment systems. Seventeen of these zones have connected their sewage systems to the system of the municipality and thus have partially reduced the negative impact they have on environment.

Present Situation in Water Sector

In Turkey, there are 16 metropolitan municipalities with populations greater than 500,000 people, 3,200 municipalities with populations lower than 500,000 people, and over 37,000 small towns and villages with populations lower then 2,000 people. The social and economic conditions of their residential units demonstrate wide differences.

According to the results of a survey done by the Turkish Institute of Statistics in 2004 on 1,911 municipalities, it was noted that 1,421 of them had established sewage systems. In that year, 47 percent of 2.77 billion m3 of waste water drained through these systems was discharged into rivers, 39.3 percent to sea, 4.2 percent to dams, 1.9 percent to lakes and ponds, 1.3 percent to fields, and 6.3 percent to other environments. 1.68 billion m3 of this discharged amount was treated in the treatment plants.

The methods used for treatment have been as follows:

  • Biological treatment (treatment implemented through the use of microbe-size organisms for the removal of organic contaminants in wastewater) -- applied to 58.2 percent of the wastewater treated,

  • Physical treatment (treatment implemented through filters, sedimentation tanks etc) -- applied to 28.3 percent of the wastewater treated, and

  • Advanced treatment (treatment implemented through advanced methods like biofilters, hybrid reactors, ion exchange, membrane processes etc)-- applied to 13.2 percent of the wastewater treated.

Present Situation in Wastewater Treatment Sector

There are 138 treatment plants in Turkey in which secondary and advanced treatment techniques are used, according to the data of 2004. In order to fulfill the requirements of the Urban Wastewater Treatment Directive, approximately 2,942 new treatment plants with various capacities must be built for towns with populations over 2,000. Additionally, in small towns and villages whose population is less than 2,000, appropriate treatment and disposal methods will be implemented as part of the EU acquis.

Agriculture is another important source of water contamination. There are 8.5 million hectares of irrigable land in Turkey. As of January 2005, 4.9 million hectares of this were irrigated. The most important problem with regard to agricultural irrigation in Turkey is lack of drainage systems. The infiltration of fertilizers and plant protection chemicals into the soil through surface irrigation systems could be reduced by treatment of wastewater drained into rivers, the sea etc., by the installation of covered drainage systems, or by the utilization of pressurized irrigation techniques.

Investments in Water and Wastewater Sectors

The directives that will require significant amounts of investment are the Urban Waste Water Treatment Directive, the Drinking Water Directive, Quality of Surface Water Intended for Drinking Water Directive, the Water Framework Directive, the Directive on Dangerous Substances Discharged into Water, the Nitrate Directive and the Bathing Water Directive. The costs associated with the seven above-mentioned water related directives were estimated at 33,969 million Euros.

Best Prospects

Development of municipal water/wastewater treatment is taking place more rapidly than the other areas of environmental protection. There are still thousands of municipalities that do not have proper water/wastewater treatment systems. Some of the smaller towns, due to their limited financial capability, may not be able to undertake large projects with international players, but there are still cities with 250,000 + populations without a treatment facility.

As far as the treatment of industrial wastewater in concerned, a small portion of industry fully complies with the rules and regulations on treatment of the wastewater generated at their own facilities. U.S. consultancy or equipment manufacturers may find business in this area as well.

Some product groups which have potential in the Turkish market are:

  • Water pumps/filters/pollution control equipment (Turkey has a strong pumps and valves manufacturing base; high-end products could have a better chance in the market),

  • SCADA systems,

  • Design and operation of water/wastewater plants,

  • Sludge treatment technologies,

  • Leakage detection systems,

  • Reverse osmosis,

  • Membrane technology,

  • Industrial wastewater remediation systems, and

  • Metering devices

Key Suppliers

Suppliers from EU countries have a strong position in this market mainly due to: proximity of EU counties to Turkey geographically; and costs associated with importing a product being typically less from EU countries. The 1996 Customs Union agreement between Turkey and the EU means that products originating from EU countries are not charged any import taxes. EU companies prefer to open direct offices here in Turkey or to assign agents to monitor developments and to report on local tender announcements.

Besides European companies, Japanese companies also track the projects in the Turkish market.

Prospective Buyers

The Ministry of Environment and Forestry is the body that makes and implements the macro-environmental plan on a national level. If a project is not a local one and better serves a country-wide cause, the ministry itself may become the buyer of services or equipment.

The local municipalities are responsible for the construction and management of drinking water and sewage networks and water and wastewater treatment plants. It is usually the case that municipalities have environmental protection departments that manage all aspects of environmental investments, but some of the more populous industrial cities like Ankara, Bursa, Istanbul and Izmir have separate water utilities in which the municipalities are major shareholders. These utilities are semi-independent with separate management teams and budgets. The names and coordinates of such entities (ISKI for Istanbul, ASKI for Ankara and IZSU for Izmir) are noted at the end of this report in the 'Resources and Key Contacts' section.

As various industries need to invest in environmental protection systems themselves, each of these companies is a potential buyer. Organized Industrial Zones are also possible customers as is mentioned in the report, as almost half of them do not have proper treatment centers and will need to invest in the construction of these.

The industry sectors that are well established in Turkey, but which are highly polluting, are: textiles, cement, Iron/steel, chemicals, food processing, automotive.

Market Entry

To be successful in the Turkish market, most companies opt to have a local representative or a liaison office. As the business develops, companies can open up subsidiaries. Companies rely on local experience and knowledge as to how business is done in this exciting market. Knowing the regulatory and business framework is almost an impossible task without the support of a local business partner.

Marketing most foreign products in Turkey is through foreign suppliers' representatives or distributors. Depending on the location of consumers/end-users, most distributors have a dealer network throughout the country or in areas where the product is most used---in the case of several industrial sectors; a dealer/repair network may be required. Commission representatives/agents, on the other hand, periodically visit their customers together with their foreign principals to maintain strong personal contact, a very important marketing tool in Turkey.

Excerpts from "Water and Wastewater Market in Turkey", U.S. Commercial Service, August 2007.