Russia’s economic woes, resulting from the global financial crisis, have started to affect Turkey’s construction industry.
Russia is one of the hardest hit countries by the global crisis. In the last two months, many constructions in Russia have either been slowed down or have been stopped altogether. A major fallout from the slowdown in the Russian construction industry has been the number of Turkish laborers that are no longer being employed on Russian construction sites. In the last two months, an estimated 20,000 Turkish workers have returned home due to slowing construction in Russia.
Russia ranked second in construction-related investments by Turks last year with $3.6 billion worth of projects slated to take place. The Russian government gives out major public developments to domestic construction companies but private sector construction needs are met by the highest bidder. This has meant that the slowdowns and cancellations are making it difficult for Turkish firms to get payments from private Russian firms.
The President of the Turkish Contractors Association, Erdal Eren, said the crisis had the most significant effect on companies doing business in Russia and Kazakhstan. The reason for this is that in both countries Turkish firms had been heavily involved in developments for the private sector, he said. "When you look at our projects in Russia you will see shopping centers, retail areas, commercial real estate developments, factories and residences. So in direct relation to this, when the crisis hit it meant that people’s ability to consume decreased," Eren said. When they started to slow down, we started feeling the squeeze, he noted.
One example Eren gave was a shopping center, which was due to be completed next year. At the request of the project financiers who are experiencing economic instability at the moment, the construction company was asked to slowdown the project plans and hand over the shopping center a year after the original due date. "So this construction site, which was employing say 3,000 workers, now is employing only half of that or 1,500. So you slow down the work," Eren noted. On some construction sites, contractors know that payments will be made late, so work on the site slows down and stops until payments are made. This means that some workers are sent back or refused work.
There are also those projects that are canceled in their infancy, according to Eren. "There are the canceled projects where the investors will say ’I am not going to start this project.’ For example, one high-end shopping center developer was saying that they were going to commission 20 new shopping centers. Now the same people are saying they are going to build 10," Eren said. "These sorts of glitches, slow downs and cancellations, have resulted in roughly 20,000 workers coming back to Turkey in the last two months. These are not official numbers," he noted.
The numbers of workers sent back to Turkey, as unofficial as they may be, tell the story of only the last two months but Eren said the problem is not a result of the last two months, but began a year ago. "In Kazakhstan, we started seeing the effects almost as soon as the instability in the U.S. began.