The European Investment Bank (EIB), the European Union's long-term financing institution, is providing a loan of EUR 225 million to the Republic of Turkey, represented by the Undersecretariat of the Treasury for upgrading, rehabilitating and extending the capacity of priority roads on the main corridors from Istanbul to the South and Eastern parts of Turkey.

This is the first major EIB loan in Turkey in the road transport sector. It is in line with the objective of the Euro-Mediterranean Mandate to support investments in infrastructure, particularly in the transport sector. Given that the improvement of the transport corridors will be supportive of developing the private sector industry, the loan will be under the new Facility for Euro-Mediterranean Investment and Partnership (FEMIP), established by EIB in October 2002 with special focus on the private sector.

The two corridors carry local and international traffic from the EU through the Balkans and Greece, to the South of Turkey, as well as to the Eastern Black Sea region. The first road scheme concerns some 134 km between Adapazari and Bozüyük, on a major north-south corridor. The second road scheme, which is located between Ankara and Samsun, the major Turkish city on the Black Sea coast, stretches along some 400 km. The project will considerably improve transport safety and efficiency and increase capacity.

Investment in the transport infrastructure has been emphasized as a critical determinant of economic development due to its enabling character, and constitutes a priority area in the Turkish Governments programme to promote economic prosperity. In a large country such as Turkey, which has the size of France and the UK combined, where 90% of freight transport and 95% of passenger transport are done by road, the importance of a sound road network for solid economic progress is paramount, especially as traffic volume is rapidly increasing.

The new Facility for Euro-Mediterranean Investment and Partnership (FEMIP) is endowed with increased financial resources. This will enable the EIB gradually to scale up its annual lending activity in the region from EUR 1.4 billion to EUR 2 billion.

The new Facility will accord priority to financing private-sector projects with the dual aim of liberalising the Mediterranean Partner Countries' economies and expanding their potential in the run-up to the EU-MPC Customs Union in 2010. In this connection, the EIB's objective is to bolster the proportion of financing it devotes to private-sector projects to 33%.

Qualitatively, the Facility places emphasis on FDI and private sector activity, as well as on social-sector projects, particularly health, education and environmental protection, in the belief that this will make for social stability and encourage economic growth.

In Turkey, EIB has contributed todate with more than EUR 2 billion towards projects of key importance for the Turkish economy. In the last years EIB finance went mainly for the earthquake reconstruction efforts. Additionally EIB funds have financed mainly projects in the environment sector. 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, the construction of more environment-friendly power and heating plants, as well as, the Silivri Underground Gas Storage, which is a nationwide project to help improve the supply of natural gas. The EIB has also promoted private sector and in particular SMEs, through global loans to local commercial banks. A recent loan was for Toyota Motor Manufacturing Turkey project. In human factor development, the Bank has financed the education framework project for the establishment of IT classrooms all over Turkey. For Turkey, there are available substantial EIB funds drawn up from three different financing instruments: the second Euro-Med financing mandate, the "Special Action Programme" and EIB's pre-accession Facility.