Van to be industrial and commercial capital linking East and West

The 7,000-year-old eastern Anatolian city of Van is on the cusp of a massive economic regeneration thanks to Iranian-Turkish political efforts that have resulted in a joint project to build an international free industry and commerce zone.

Using Iran’s cheap energy and Turkey’s know-how and technology, the idea is to produce goods in eastern Turkey on the Iranian border and transfer them to Central Asia and Iraq via a railway along the route of the historical Silk Road, which extends all the way to Pakistan.

“Turkey has free trade zones and industrial zones, but no international free industry and commerce zone yet. Industrialists from both countries will use a common area and energy from a foreign country. The customs taxes will be abolished, although there is no legal groundwork laid out yet,” said Van Gov. Münir Karaloğlu.

The project was first announced in September when Industry and Trade Minister Nihat Ergün traveled along the 280-kilometer border by helicopter to determine the most suitable area, Karaloğlu told the Hürriyet Daily News & Economic Review in a phone interview Monday.

“We can create a new China, Bangladesh or Egypt along the Turkey-Iran border for the textile sector,” Karaloğlu said. “The biggest handicap for our manufacturers is the cost of energy. If we succeed in serving our producers with cheap Iranian energy, a significant economic boom will occur in the region. They always complain about difficulties in investing and operating in these countries and wish to come back to Turkey for more reasonable costs,” he said, adding that he hoped the project could contribute to assisting the unemployment-stricken region.

Ergün selected the two areas in Van province: Kapıköy and Gelincik. Gelincik fully lies on public land, but Kapıköy has a logistical advantage. The railway linking Turkey to Iran, Iraq, Central Asia and Pakistan goes through Kapıköy. “We’re exerting efforts to open the border gate of Kapıköy to road transportation. It is about to be finalized,” the governor said as an additional advantage.

Ergün has promised to accomplish the project by at least completing fieldwork and setting up the legal framework by the end of the year, Karaloğlu said.

Prime Minister Recep Tayyip Erdoğan last week ordered the preliminary work to speed up after his talks with Iranian First Deputy President Mohammed Reza Rahimi. Van deputy Kayahan Türkmenoğlu, from the Justice and Development Party, or AKP, was present at the talks in Tehran

“Both sides are paying attention to this project, which is currently at the stage of elaboration. The aim is to prevent illegal trafficking while bolstering bilateral trade between the neighbors,” Türkmenoğlu told the Daily News on Tuesday.

Iranian Ambassador Bahman Husseinpour had earlier paid visits to the region and encouraged his Turkish colleagues to initiate joint commerce and transportation projects. Zahir Kandaşoğlu, the head of Van’s commerce and industry chamber, also submitted a feasibility report to the ambassador. “Kapıköy is the most feasible area thanks to its location on the international railway route. Some 700 million square meters of land are available and additional land is possible if necessary,” Kandaşoğlu told the Daily News.

“Minister Ergün vowed to clarify the project within the next two months,” he said, adding that officials should produce concrete results. “As people in the region, we want officials to focus on this and complete it after setting forth such an ambitious project. We have been disappointed with unrealized promises in the past.”

Already contacted by 12 firms, Kandaşoğlu said: “Huge investments are expected. I recently received a call from a businessman intending to employ 1,000 people. Manufacturers from many sectors are planning to move their facilities here. I foresee investment of more than $100 million.” He said the number of investors is likely to increase after the project is completed.

Turkey’s petrochemical giant, PETKİM, will be one of the biggest investors in the zone as its main raw material poli-etilen will come from Iran at a reasonable cost. Company officials, accompanying Prime Minister Erdoğan for his Tehran talks, inked several agreements to establish new business.

Door left open to European investors

Asked if it would be limited to only Turkish and Iranian investors, deputy Türkmenoğlu replied: “Capital has no nation or gender. Foreign investors may take part according to the regulations.”

Some European companies, including Germany-based BURUS Investment Group, have already been seeking investment opportunities in Van, Kandaşoğlu said. “You can produce in Van and transfer to Iraq within a day thanks to the railway passing through Turkey, Iran and Iraq. Manufacturers of prefabricated goods are quite interested.”

Iran promises 50 million for railway construction

Van lies on a strategic juncture for transferring goods to Afghanistan, Iran, Pakistan, Central Asia and Iraq. However, an additional railway route between Van and Tatvan is needed to bypass the dependency on old-fashioned ferries on the lake. “The capacity of ferries fails to cover our needs. The new railway will cost approximately $100 million. Iran attaches importance to improved transportation and has promised to cover half the costs,” Kandaşoğlu said.