The European Investment Bank (EIB), the European Union's long-term lending institution, is providing EUR 40 million (1) for water sector works in medium-sized Turkish municipalities, located primarily in the eastern part of Turkey (Central or Eastern Anatolia).

The EIB loan is signed under the Special Action Program (SAP) Mandate for Turkey (2001-2004), which is intended to assist Turkey to upgrade its infrastructure in preparation for the Customs Union with the EU. Considering Turkey's status as an accession country, the EIB loan will as well contribute to meeting the "environmental acquis", in particular the Urban Wastewater Directive (UWWD).

The EIB loan is made available for 25 years to the Republic of Turkey for onlending to selected mid-sized Turkish municipalities. Eligible project components have been already identified in the cities of Sivas, Siirt and Batman. Other cities are currently being appraised and will soon be included under the EIB loan. The EIB loan will be allocated following a Framework approach, designed in close collaboration with the German Kreditanstalt für Wiederaufbau (KfW) to meet the specific water sector needs of medium-sized municipalities in Turkey (having between 100,000 and 500,000 inhabitants).

The EIB loan covers investments in water supply (mainly leak detection programmes), wastewater collection and treatment (mainly rehabilitation and extension of collection networks and the construction of sewerage treatment plants) and stormwater drainage (construction of stormwater channels). The selected municipalities will be supported throughout the project preparation and implementation by external assistance, foreseen under the Framework approach defined by KfW and EIB. This assistance will also include institutional support, designed to strengthen the operations of public water services in the selected municipalities.

The EIB is a lead player in implementing the European Union's priority objectives. In 2001, EIB financing for projects supporting European Union policy objectives totalled EUR 37 billion (up 13% on 1999). EUR 31 billion went to projects within the EU Member States and close to EUR 3 billion to those in the Accession Countries, while lending in other countries ran to EUR 3 billion. To fund these activities, the EIB borrowed EUR 32 billion on the world's capital markets. In the Mediterranean region the EIB operates under the Euro-Mediterranean Partnership, which complements the EU Member States' own bilateral co-operation policies. Under the second financing mandate of the Euro-Med Partnership covering the period 2000-2006, the EIB is to provide EUR 6 425 million for projects in the 12 Mediterranean countries, which have signed co-operation or association agreements with the EU. The EIB is giving a particular focus to supporting efforts to develop a more open economy and to assist companies in preparing for market liberalisation, with a view to the progressive establishment of a free-trade area with the EU.

Further to the Barcelona European Council (15-16 March 2002), the EIB is set to increase cooperation with the Mediterranean Partner Countries by establishing a "Euro-Med Investment Facility and Partnership" (EMIFP) complemented by EIB representation in the region. Operational by Autumn 2002, this Facility foresees increased financial resources, leading the EIB to expand gradually its annual lending in the region from EUR 1.5 billion to EUR 2 billion.

Since 1995, the EIB has contributed some EUR 800 million towards projects of key importance for the Turkish economy. EIB finance for infrastructure went mainly for environmental projects and the earthquake reconstruction effort. Among the projects financed in Turkey are: the wastewater and effluent treatment systems in Adana, Diyarbakir, Izmit and Tarsus; the desulphurisation equipment at the Yeniköy power station on the Aegean coast and the construction of more environment-friendly power and heating plants. The EIB has also promoted SMEs through global loans to local commercial banks.

(1) Conversion rates: EUR 1 = TRL 1,269,500 at 31.12.2001