The World Bank
Eastern Türkiye Middle Corridor Railway Development Project (P179128)
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Project Information Document (PID)
Appraisal Stage | Date Prepared/Updated: 18-Sep-2024 | Report No: PIDA0249
The World Bank
Eastern Türkiye Middle Corridor Railway Development Project (P179128)
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BASIC INFORMATION
A. Basic Project Data
Project Beneficiary(ies) Region Operation ID Operation Name
Eastern Türkiye Middle
EUROPE AND CENTRAL
Turkiye P179128 Corridor Railway
ASIA
Development Project
Financing Instrument Estimated Appraisal Date Estimated Approval Date Practice Area (Lead)
Investment Project
19-Sep-2024 12-Nov-2024 Transport
Financing (IPF)
Borrower(s) Implementing Agency
Ministry of Transport and
Republic of Türkiye
Infrastructure
Proposed Development Objective(s)
The Project Development Objective is to improve the rail connectivity of eastern Türkiye along the Divriği-Kars-Georgia
border railway section of the Trans-Caspian Middle Corridor.
Components
Rehabilitation and Modernization of the Divriği-Kars-Georgia Border Railway Line
Project Management
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PROJECT FINANCING DATA (US$, Millions)
Maximizing Finance for Development
Is this an MFD-Enabling Project (MFD-EP)? No
Is this project Private Capital Enabling (PCE)? No
SUMMARY
Total Operation Cost 1,615.21
Total Financing 1,615.21
of which IBRD/IDA 660.00
Financing Gap 0.00
DETAILS
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The World Bank
Eastern Türkiye Middle Corridor Railway Development Project (P179128)
World Bank Group Financing
International Bank for Reconstruction and Development (IBRD) 660.00
Non-World Bank Group Financing
Counterpart Funding 454.51
National Government 454.51
Other Sources 500.70
Asian Infrastructure Investment Bank 250.00
Islamic Development Bank 250.70
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Environmental And Social Risk Classification
Substantial
Decision
The review did authorize the team to appraise and negotiate
B. Introduction and Context
Country Context
1. Türkiye’s development achievements over the past two decades have been remarkable. Real gross domestic
product (GDP) growth averaged 5.4% between 2002 and 2022, resulting in income per capita (in real terms) that was
more than doubled over the same period. Moreover, growth was accompanied by rapid poverty reduction, with the
poverty rate (US$6.85 2017 PPP poverty line) halving from above 20% in 2007 to less than 10% in 2021. As in other
countries, the COVID-19 pandemic had a negative impact on growth in 2020, but the country was one of the few
globally that did not register a GDP contraction that year, instead growing 1.9%. This performance was due, to a large
extent, to the government’s economic policy response to the pandemic, which focused on loosening monetary policy
and rapid credit expansion. Türkiye then achieved double-digit GDP growth in 2021 (11.4%) and maintained significant
momentum in 2022 (5.5%) and 2023 (4.5%). Yet, the policy framework that helped the country navigate the COVID-19
shock also heightened macroeconomic risks created by high inflation (annual inflation reached 52% in August 2024,
after having peaked at 85.5% in October 2022), currency depreciation (77% against the US$ between January 2020 and
January 2024), corporate and banking sector vulnerabilities, and declines in reserve buffers.
2. Following the May 2023 Presidential elections, a new economic team took over and started implementing a
program to normalize the economy. This includes monetary policy tightening, with interest rates increasing from 8.5%
in May 2023 to the current 50% (September 2024), the unwinding of distortive financial regulations, and fiscal revenue
measures to curtail the fiscal deficit. Markets are reacting positively, with 5-year Credit Default Swaps (CDSs) declining
from above 500 basis points in May 2023 to around 270 in September 2024. All major rating agencies have upgraded
Türkiye’s sovereign credit rating and upgraded the country’s outlook to positive. In the context of the disinflationary
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
program, the Government of Türkiye (GoT) projects the end-2024 inflation at 41.5%, and the end-2025 inflation at
17.5%, whereas GDP growth is projected to decelerate to 3.5% in 2024 and to 4.0% in 2025.
3. The authorities are considering how to complement macroeconomic adjustment measures with structural
reforms that may improve growth prospects going forward. One area of attention in this regard is the need to increase
productivity, whose contribution to growth during 2016-2021 was only half of that during 2010-2015. Outside of a few
standout industries such as automotive, basic metals, wearing apparel, and textiles, Türkiye’s firm-level productivity
has stagnated (manufacturing) or declined (construction and services) since the 2009 global economic crisis. This
includes large manufacturing subsectors in terms of value-added and employment share, like electrical and electronic
products, machinery and equipment, food, fabricated metals, and furniture, which suffer from lower-than-average
productivity levels and are highly transport and logistics intensive.1 Furthermore, Türkiye’s participation in global value
chains (GVCs), which has strong productivity spillovers yet depends on reliable international transport connectivity and
cost-effective logistics, remains below that of other upper middle-income countries like Malaysia and Mexico.2
4. Higher productivity growth needs to be accompanied by a reduction in spatial economic disparities. Despite
a sustained reduction in regional inequities, in 2019 Türkiye had the third widest spatial disparity in income per capita
in the OECD, measured as the ratio of the top 20% richest regions to the bottom 20% poorest regions.3 Reducing this
gap matters, because lower levels of subnational income inequality are associated with stronger and more sustained
growth. Policies to reduce inequality should be pursued not only to improve social cohesion outcomes, but as drivers
of long-term growth in their own right.4 World Bank research shows that a particularly effective way of stimulating
economic activity in lagging regions is by providing them with improved basic transport connectivity to/from leading
regions.5 In particular, Türkiye has the opportunity to better connect its eastern provinces with (a) neighboring trade
partners, and (b) Türkiye’s leading regions in the western half of the country.
5. Türkiye is highly exposed to the impacts of climate change and has placed climate change mitigation and
adaptation at the top of its development agenda. The country ratified the Paris Agreement in October 2021, updated
its first Nationally Determined Contribution (NDC) in 2023, and committed to achieving a net-zero economy by 2053.
According to the World Bank’s Türkiye Country Climate and Development Report (CCDR),6 Türkiye’s transport system—
and in particular its national railway network—is more vulnerable to climate hazards than that of comparable countries.
Moreover, the EU Green Deal and its potential economic implications for Türkiye, such as a need to reduce the carbon
footprint of Turkish supply chains under the forthcoming Carbon Border Adjustment Mechanism (CBAM)—including a
possible CBAM scope extension into the transportation and logistics component of these chains—further contributes
to the urgency for Türkiye to reduce emissions across its main energy-consuming sectors, including transportation.
6. The proposed operation will support Türkiye’s development efforts to advance its (i) growth, (ii) spatial
convergence, and (iii) climate change agenda, through improvements in railway infrastructure. The operation will
not only contribute to reducing logistics costs but also open the door to new economic opportunities. It will contribute
to regional convergence by investing in one of Türkiye’s lagging regions. And by promoting the transportation of freight
by rail, it will help decarbonize the transport sector (a priority identified in the CCDR).
1 World Bank (2019), Türkiye Productivity Report 2019: Firm Productivity and Economic Growth in Türkiye.
2 Asian Development Bank et al. (2021), Global Value Chain Development Report 2021: Beyond Production.
3 OECD (2022), OECD Regions and Cities at a Glance 2022, OECD Publishing, Paris.
4 Cingano, F. (2014), “Trends in Income Inequality and its Impact on Economic Growth�?, OECD Social, Employment and Migration Working Papers,
No. 163, OECD Publishing, Paris.
5 World Bank (2009), World Development Report 2009: Reshaping Economic Geography , World Bank, Washington DC.
6 World Bank Group (2022), Türkiye Country Climate and Development Report, Washington DC.
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
7. The operation also has a global public good angle as it will contribute to developing the Trans-Caspian Middle
Corridor (the “Middle Corridor�?). The Middle Corridor (MC) is a multimodal, intercontinental trade corridor linking
China, Central Asia, the South Caucasus, Türkiye, and the European Union through rail and short sea shipping
connections. The development of the MC will require a multiyear/multi-country/multisectoral effort, and the World
Bank plans to accompany Türkiye—and other countries—with analytical work, convening power aimed at facilitating
coordination efforts, and potential financing of key transport investments. In this regard, this operation is expected to
(i) create incentives for other countries to address existing bottlenecks within their territories given anticipated growth
in freight flows and the expectation that trade between East Asia, Central Asia, and Europe continues to expand; and
(ii) result in further collaboration among countries in the region towards integrated infrastructure provision and
improved service delivery outcomes.
Sectoral and Institutional Context
8. Türkiye’s freight transport task makes scant use of rail. This generates avoidable transport costs, increases the
logistics costs of some—especially bulk commodity—supply chains, and is inconsistent with the country’s climate
aspirations. Of the 340 billion non-pipeline inland ton-km transported in Türkiye in 2022, 95% took place by truck and
only 5% by rail.7 That is well below the rail freight market share of other upper middle-income countries of similar
commodity mix and length-of-haul profile as Türkiye, such as South Africa (37%), China (29%), Mexico (25%), and Brazil
(20%). It is also less than a third of that of the EU (17%), and one-seventh that of the U.S. (34%). A similar imbalance
applies to the way Türkiye’s foreign trade flows are transported: in 2022 56% of its trade by value used maritime ports
as entry-exit gateways, yet only 16 of 71 main ports (and 210 total ports) are rail-enabled; 34% used road border
crossings; 10% used airports; and less than 1% used railway border crossings. This is economically costly in terms of
shipper out-of-pocket transport costs, as trucking in Türkiye is 2.8x more expensive per ton-km than rail freight; as well
as in terms of the economic value of greenhouse gas (GHG) emissions, as Turkish heavy-duty trucks generate 2.6x more
well-to-wheel carbon dioxide (CO2) emissions per ton-km transported than diesel rail freight and 6.3x more well-to-
wheel CO2 emissions per ton-km transported than electric rail freight. Türkiye therefore has an opportunity, unique in
magnitude among most upper middle-income countries, to reduce transport costs and mitigate the impacts of climate
change by promoting rail freight adoption and shifting freight from trucks to rail.
9. Rail freight has a critical role to play—particularly in the short to medium term—towards meeting Türkiye’s
net-zero economy target. In Türkiye, as in much of the rest of the world, it is not possible to decarbonize the economy
without decarbonizing the transport sector, which in 2019 was responsible for 23% of the country’s energy-related
GHG emissions. In turn, Türkiye’s transport sector cannot be decarbonized without decarbonizing the transportation
of freight, as the latter accounts for half of transportation emissions. For Türkiye, decarbonizing freight transport
means, above all, reducing emissions from the transportation of goods by trucks, particularly heavy-duty trucks. In
2019, 95% of Türkiye’s GHG emissions from freight transport originated from trucks; more than two-thirds of this (68%)
was generated by heavy-duty trucks, which are comparatively more difficult to decarbonize than light-duty commercial
vehicles, with a technology trajectory that is likely to take longer to reach widespread adoption than that of low- and
zero-carbon small, short-haul trucks and vans. During the early period in the runup to the 2053 net zero target—e.g.,
over the next 10-15 years—facilitating the use of rail freight, and shifting long-haul truck freight to rail, are among the
most effective ways to decarbonize freight transport, while also reducing local pollution, road accidents, and road
infrastructure wear and tear by taking trucks off the roads.
7 Non-pipeline inland freight refers to all freight transported by trucks, rail, or inland waterways. It is a standard definition of the national freight
transport task that is commonly used to assess modal choice and benchmark freight modal split across countries.
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
10. Key portions of Türkiye’s main railway lines, particularly on the eastern half of the country, are technically
obsolete and in need of modernization; the most strategic of these is the 660km Divriği-Kars-Georgia border line.
This is an international access line, linking Türkiye with the South Caucasus via the Baku-Tbilisi-Kars (BTK) railway line
and, via the Caspian Sea, onwards with Central and East Asia. It is also intended as a vital domestic link, connecting the
four provinces of eastern Türkiye that host the line—Sivas, Erzincan, Erzurum, and Kars—with the country’s main
economic poles to the west. One of the oldest sections in the network, with portions that predate the founding of the
Turkish Republic, this line lacks modern signalization and is operated with an outdated, manual traffic control system
of line dispatchers, paper-based train orders, and telephone communication known as Central Administration by
Telephone. This decreases the line’s freight carrying capacity, makes it more prone to delays and less safe, and
generates avoidable costs in infrastructure maintenance and service provision. Moreover, the line is not electrified and
relies solely on diesel-powered equipment, is constrained in terms of train speeds and station lengths, and is in urgent
need of rehabilitation after decades of deferred maintenance. As a result, Türkiye’s railway network suffers from poor
domestic and international accessibility on its eastern end.
11. The development relevance of the Divriği-Kars-Georgia border railway line goes beyond its technical
obsolescence and need for rehabilitation: it is an integral part—and major bottleneck—of the Middle Corridor. In
recent years the MC has emerged (a) as an alternative lifeline connection between Central Asia and the rest of the
world; (b) as an alternative discretionary overland connection between China and Europe; (c) as an alternative
connection between Türkiye and Central and East Asia; and (d) as a driver of operational resilience, including climate
resilience, for Asia-Europe supply chains.
12. The MC has attractive growth and performance improvement prospects. According to World Bank (2023),8
non-oil freight volumes on the MC have the potential to triple, and freight travel times to reduce by half, over the
medium term—provided that investments are made to address key capacity and service delivery bottlenecks. And,
according to the same source,9 the Divriği-Kars-Georgia border railway line is the single most capacity-constrained
section of the entire MC railway route, from the China-Kazakhstan border to the Türkiye-Bulgaria border, at present.
This limits the freight capture and logistics efficiency potential of the Türkiye branch of the MC. The GoT has made it a
policy priority to develop the railway component of the MC within its territory. For example, the U2053 plan includes,
under its “main sectoral targets,�? for Türkiye to “become a logistics base in the Middle Corridor.�?10
13. The Divriği-Kars-Georgia border line runs through an economically lagging region of Türkiye; upgrading it
would facilitate local economic activity, create jobs in its immediate catchment, and help alleviate Türkiye’ s spatial
economic disparities. Like eastern Türkiye as a whole, the four provinces that host the line lag the rest of the country
across several indicators of economic well-being. These provinces are also highly exposed to extreme weather events
and natural hazards. Specifically, there is a high risk of urban floods, landslides, and wildfires in all four provinces, as
well as a medium to high risk of earthquakes. This underscores the need for Türkiye to invest in connectivity
infrastructure in the subregion that can both better connect these provinces to markets in leading economic regions
(domestically and across borders) and withstand the impact of these hazards with higher levels of operational
continuity as a matter of improved service delivery.
8 World Bank (2023), Middle Trade and Transport Corridor: Policies and Investments to Triple Freight Volumes and Halve Travel Time by 2030.
9 Ibid.
10 Republic of Türkiye, Ministry of Transport and Infrastructure (2022), Transport and Logistics Masterplan 2053.
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
C. Proposed Development Objective(s)
Development Objective(s) (From PAD)
The Project Development Objective (PDO) of the Eastern Türkiye Middle Corridor Railway Development Project (ETMIC)
is to improve the rail connectivity of eastern Türkiye along the Divriği-Kars-Georgia border railway section of the Trans-
Caspian Middle Corridor.
Key Results
14. Progress towards the PDO will be tracked based on the following 5 outcome indicators:
▪ Maximum freight carrying capacity of the Divriği-Kars-Georgia border railway line (tons per year);
▪ Rail freight travel time between Divriği and the Türkiye-Georgia border (hours);
▪ Predictability of rail freight travel time between Divriği and the Türkiye-Georgia border (coefficient of variation of
travel time);
▪ Well-to-wheel GHG emissions per ton-km transported on the Divriği-Kars-Georgia border railway line (grams of CO2
per ton-km) (climate indicator); and
▪ People benefiting from improved access to sustainable transport infrastructure and services (scorecard indicator).
D. Project Description
15. The project comprises 2 components, as follows:
▪ Component 1. Rehabilitation and Modernization of the Divriği-Kars-Georgia Border Railway Line (US$1,339.2
million, including contingencies and excluding VAT; IBRD US$656.0 million, AIIB joint co-financing US$248.5
million, IsDB parallel financing US$250.7 million, GoT US$183.9 million)
Component 1 entails the brownfield rehabilitation and modernization of the Divriği-Kars-Georgia border railway
line—an existing, outdated international railway link in eastern Türkiye, 660km in length. The target line connects
Türkiye with Georgia and the rest of the MC to the east; provides basic connectivity between eastern and western
provinces of Türkiye; and is a section of the MC within Türkiye, ultimately linking Türkiye with the rest of Europe
to the west.
Component 1 activities include engineering design services, civil works, and construction supervision services to
rehabilitate, electrify, signalize, and expand the capacity of the target line, including construction/rehabilitation of
main tracks and sidings, bridges, terminals, stations, drainage structures, protective structures, and other facilities.
These interventions will increase the line’s cargo carrying capacity from an estimated current maximum effective
capacity of 750,000 tons per year to 20 million tons per year.
▪ Component 2. Project Management (US$5.5 million, excluding VAT; IBRD US$4.0 million, AIIB joint co-financing
US$1.5 million)
This component comprises the mobilization of a specialized firm with expertise in project management,
construction, engineering (including climate resilience), social and environmental monitoring, citizen engagement,
results monitoring and evaluation, and other aspects of project implementation oversight, to staff the Project
Implementation Unit (PIU). Component 2 further comprises the implementation of an Enhanced Internship
Program at the Ministry of Transport and Infrastructure (MoTI) for last-year female university students in
transportation, logistics, and related fields in the Ankara area, which will be overseen by the PIU.
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
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Legal Operational Policies Triggered?
Projects on International Waterways OP 7.50 No
Projects in Disputed Area OP 7.60 No
Summary of Screening of Environmental and Social Risks and Impacts
16. Both the environmental and social (E&S) risks for the project are rated Substantial. The relevant
Environmental and Social Standards (ESSs) applicable under the Environmental and Social Framework (ESF) are ESS1,
ESS2, ESS3, ESS4, ESS5, ESS6, ESS8 and ESS10. The key environmental and social risks may include air pollution and
noise from construction machinery and quarries and operation phase noise and vibration impacts; soil disturbance and
loss during earth-moving; loss of vegetation; impacts related to improper waste management; impacts related to
improper construction camp management; risks to community health and safety; land acquisition; physical relocation
and livelihood impacts; labor conditions and labor influx and; potential impacts on culturally and naturally protected
areas, (such as habitat loss/fragmentation and/or displacement, invasive alien species, damage to registered
cultural/archaeological sites and/or assets). A Project-wide Environmental and Social Impact Assessment (ESIA) has
been conducted during the preparation of the Project which has identified specific risks and impacts and has developed
management/mitigation plans (by appraisal). In addition, a Resettlement Framework (RF), Stakeholder Engagement
Plan (SEP), and Labor Management Procedure (LMP) has been prepared. Furthermore, the ESIA/ESMP, BMP, and
contractor-specific ESMPs (C-ESMPs) will be updated based on the findings of additional biodiversity studies to be
conducted prior to start of construction work during the project’s implementation phase.
17. Based on the sexual exploitation and abuse and sexual harassment (SEA/SH) risk screening tool for projects with
major civil works, the SEA/SH risk of the Project is assessed as Low. However, given that the project will be implemented
across four provinces, including in hard-to-reach areas, it may be challenging to monitor project activities by the PIU.
In addition, in some areas along the target line’s right-of-way (RoW), there may not be adequate institutional set up to
address SEA/SH-related incidents. The exact size of the labor workforce and the SEA/SH risks posed to local populations
has been further assessed in the ESIA. The project will implement SEA/SH mitigation measures, including SEA/SH
response mechanisms utilizing the survivor-centric approach, as part of the site-specific ESMPs; a Code of Conduct for
workers; a mechanism to report SEA/SH grievances; and training and awareness sessions for project workers and
affected communities.
18. The project will utilize the design-build procurement method (FIDIC Yellow Book) to reduce the time between
project approval and the commencement of civil works. Contractors will finalize the design of project activities and
may make further modifications that differ from those outlined in the ESIA report. Therefore, if needed, contractors
will carry out additional E&S assessments and the results of these assessments will be reflected in the E&S management
plans and C-ESMPs.
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Eastern Türkiye Middle Corridor Railway Development Project (P179128)
E. Implementation
Institutional and Implementation Arrangements
19. MoTI’s Directorate-General of Infrastructure Investments (AYGM) will assume overall implementation
responsibility of ETMIC and will serve as its implementing agency at the working level. AYGM has an existing Project
Implementation Unit (PIU) responsible for implementing the ongoing Bank-financed Rail Logistics Improvement
Project (RLIP). A new sub-unit within AYGM’s PIU will be established to implement ETMIC. The ETMIC sub-unit will (i)
continue to report to the PIU’s Director and Deputy Director, and (ii) be staffed by current MoTI/AYGM technical
staff, supplemented by external experts hired through a consulting services contract with a firm. The PIU, including
its ETMIC-dedicated sub-unit, will continue to be led by the Deputy Director General of AYGM as PIU Director, and
by the Director of AYGM’s Railway Construction Department as Deputy PIU Director. The ETMIC sub-unit will be
staffed by at least 11 members, including a sub-unit leader, engineering and construction specialist, procurement
specialist, financial management specialist, Environmental, Social, Health and Safety (ESHS) manager, environmental
specialist, social development specialist, occupational health and safety (OHS) specialist, two community liaison
officers (one male and one female), and an administrative assistant. Existing AYGM expert personnel experienced in
railway engineering, construction, and related fields will further staff the ETMIC sub-unit.
20. The project will mobilize development finance by the World Bank (IBRD US$660 million), the Asian
Infrastructure Investment Bank (AIIB) (US$250 million joint co-financing), and the Islamic Development Bank (IsDB)
(US$250.7 million parallel financing), complemented by counterpart funds from the GoT (US$184 million, excluding
VAT11). Project implementation support will be provided by the co-financiers in the form of (i) joint formal
implementation support missions to be conducted biannually, including site visits and meetings with all relevant
stakeholders, including GoT agencies within and outside MoTI; (ii) provision of just-in-time implementation guidance,
through meetings, discussions, site visits, Bank-led training, and technical support; and (iii) collaboration among the
co-financiers, to ensure that all applicable regulations, for example with regard to the World Bank’s ESF, are complied
with throughout.
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CONTACT POINT
World Bank
Murad Gurmeric
Senior Transport Engineer
Andrew Michael Losos
Senior Transport Specialist
Luis C. Blancas Mendivil
Senior Transport Specialist
Borrower/Client/Recipient
11 All VAT due from project activities will be covered by GoT counterpart funds.
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The World Bank
Eastern Türkiye Middle Corridor Railway Development Project (P179128)
Republic of Türkiye
Implementing Agencies
Ministry of Transport and Infrastructure
Yalçın Eyigün
Director General of Infrastructure Investments
yalcin.eyigun@uab.gov.tr
FOR MORE INFORMATION CONTACT
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 473-1000
Web: http://www.worldbank.org/projects
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APPROVAL
Task Team Leader(s): Murad Gurmeric, Andrew Michael Losos, Luis C. Blancas Mendivil
Approved By
Practice Manager/Manager: Shomik Raj Mehndiratta 29-Aug-2024
Country Director: Alfonso Abel Loureiro Caamano 18-Sep-2024
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