The Turkic Investment Fund can create a new pocket of capital on the Silk Road

The Turkic Investment Fund can create a new pocket of capital on the Silk Road

The last decade has seen the Turkic world working towards a grand vision for renewed economic, political and cultural connectivity across Eurasia. From the rebirth of historic trade routes to the establishment of new institutions, the members of the Organization of Turkic States (OTS) have been seeking to move from proximity to connectivity. The establishment of the Turkic Investment Fund (TIF) is a step in this direction and will also change the capitals and cooperation dynamics of the Silk Road. [1] The Fund is the Turkic states' first joint financial institution, the establishment of which, along with the signing of the TIF Agreement at the Extraordinary OTS Summit in March 2023 and the Fund's entry into force in early 2024, was the first initiative of its kind by the Turkic states. The TIF has a registered capital of 500-600 million US dollars and an initially subscribed capital of 500 million US dollars and is designed to unlock the economic potential of its member states – Türkiye, Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan and recently Hungary, by promoting trade and investment cooperation and by launching joint development projects. The significance of the TIF is also functional, as well as its size: the TIF is expected to provide equity, loans and guarantees for development projects, particularly SMEs, in priority sectors.

From shared culture to shared capital

Until now, the primary driver of Turkic integration has been cultural diplomacy and symbolism (summit, common alphabet, statements of solidarity at high levels). The TIF is an indicator of the change in economic institutionalization. In this sense, it is a repetition of other integration experiences: integration is not possible without shared capital. The TIF is supposed to be the financial backbone of Turkic integration, just like the European Investment Bank (EIB) has been the financial backbone of EU integration. The Fund is not yet scaled, but it is scalable. Official statements indicate that the capital is to be scaled up thanks to successful projects and thanks to clear business cases which can attract more investors including foreign partners. The member states are hoping to facilitate financing in less commercialised markets - transport and logistics, industrial production, agriculture and agri-tech, information and communication technologies, tourism and renewables - by pooling resources and diversifying risks. In this way, the TIF can help bridge the gap between opportunities for investment in the region and the lack of adequate financial instruments. [2]

Middle Corridor at a junction

This is nowhere more true than on the Trans-Caspian International Transport Route-the so-called Middle Corridor-that links China and Southeast Asia with Europe, passing through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and Türkiye. This is a multimodal route that has gained geopolitical significance as governments and businesses look for alternatives to the traditional northern routes that would involve Russia. The Turkic Investment Fund is already being touted as a future development partner for Middle Corridor and officials from OTS and the Fund have included infrastructure, renewable energy and logistics as potential areas of investment. In practice, TIF money can go to the interoperability area: the modernization of the railway and dry port in Kazakhstan, the infrastructure of the port of the Caspian and Black Sea in Azerbaijan and Georgia, or the co-investment in the logistics centres and industrial zones of Turkiye. While a 500-million-USD fund won't overnight make Eurasia a more integrated place, it will be a signal to much larger investors (from the oil-rich sovereign funds in the Gulf to the multilateral development banks) that the Turkic world is harmonising on a coherent set of economic principles. [3] This is probably the most significant contribution of the signalling effect to the Fund: a multiplier of confidence for public and private investors looking for reliable, predictable and institutionally-bound partners in the region. With Middle Eastern and Asian investors looking to move beyond the beaten paths and regionalize in traditional western markets, the regionally owned financial institution in Istanbul, hailed as the financial capital of the Turkic world in 2025, offers a culturally close, geographically relevant platform for co-investment.

Between geopolitics and geoeconomics

The rise of the TIF also demonstrates a shift in the wider geopolitical picture: the Turkic world is shifting out of identity-based cooperation, to functional multilateralism. The TIF is not in competition with other international financial institutions; it is characterised as a "complementary organisation" to the EBRD, ADB or AIIB. Its brief to focus on intra-regional trade, SMEs and sustainable development suggests a bottom-up and regional approach to top-down mega-projects. This balance is crucial. For Ankara, Baku, Astana, Bishkek, Tashkent or Budapest, the TIF provides a means of co-ordinating priorities without provoking zero-sum apprehensions from neighbours or regional powers. It is a form of hedging: building Turkic economic co-operation and being open to co-operate with the EU, China and the Gulf.

Challenges ahead

But it is prudent to be cautious. The region's infrastructure needs have been calculated in tens and perhaps hundreds of billions of dollars, more than the Fund's current capital. If the TIF does not soon show its ability to identify bankable projects, to manage the risks, to mobilise additional finance, it is likely to become a symbolically important, but financially marginal entity. Whether the TIF becomes a credible regional institution, or another white elephant development institution, will be transparent and governed. The articles of association stress that the member states have equal capital share and equal voting rights, a trait that can be a strength in terms of ownership and a weakness when political agendas diverge. Rigorous project selection, explicit guarantees and adherence to international principles will be needed to ensure that the project will attract co-financing from international partners.

Why it matters

Despite these challenges, the Turkic Investment Fund is of special significance. It is the first inter-governmental financial institution of the Turkic world, that will place a decade of political rhetoric into a financial institution with a balance sheet and governance. It is also a manifestation of a larger trend in 21st century globalisation: the development of "mini-multilateral" spaces due to comparable geography, culture or identity. In this sense the TIF is not a new source of capital, it is a message. The Turkic states no longer want to be a mere interregional transmission belt for big powers; they would like to be a hub of innovation and capital, and an institutional project of the Silk Road. If the Fund manages to make at least some of that vision happen through credible projects on the Middle Corridor, it may help redefine the terms and conditions of Eurasian connectivity financing - and its financiers. Sometimes, small institutions made a big difference. It may emerge that the Turkic Investment Fund may be able to prove that one of the most significant processes of the Silk Road 2.0 is not a mega-project or a statement of intent from a summit, but a small, local fund slowly learning how to move capital around a map that its members have yet to draw for themselves. [4]

References

[1] https://turkicfund.org/about-us/

[2] https://www.dailysabah.com/business/economy/turkic-states-joint-investment-fund-to-debut-with-500m-capital

[3] https://qazinform.com/news/turkic-investment-fund-officially-launched-09f9fa

[4] https://timesca.com/turkic-investment-fund-opens-operation/

Author: Dávid Biró, Senior Advisor, Research and Academic Network Lead of the Ludovika Center for Turkic Studies

Image source: turkicstates.org