The 2,500-year-old city famously bridging east and west knows how to roll with the times. Istanbul’s 21st century make­over – sleek skyscrapers, chic hotels, a state-of-the art airport terminal and award-winning national carrier – is drawing in global companies such as GE, Nestlé, Coca-Cola, Microsoft and PepsiCo, which have made it their headquarters for multiregional operations.

But beyond the glass-and-steel facades, the city of about 15m people is riddled with infrastructure challenges that loom large over its bid to become a global powerhouse.

While Istanbul’s position as a regional crown jewel is undisputed, its quality of life rankings are closer to those of a third-world city than to London, Paris or Stockholm. Rapid population growth, traffic jams, poor public transport, earthquake risk and lack of a cohesive urban development strategy are all pressing issues. At 5,343 sq km, it is one of the largest metropolitan areas in the world.

The city is governed by the Istanbul Metropolitan Municipality (IMM) with a directly elected mayor, Kadir Topbas, who belongs to the ruling Justice and Development Party (AKP). The position is an important one in Turkish national politics. Recep Tayyip Erdogan, the prime minister, began his ascendancy as mayor from 1994 to 1998.

The IMM has 39 elected local municipalities but no overarching plan to co-ordinate development between them. In 2005, the mayor set up the Istanbul Metropolitan Planning and Design Centre (IMP), a public-private partnership, but its efforts to develop a plan have been dogged by controversy.

Unchecked population growth is the biggest strain on the city’s resources. The Organisation for Economic Co-operation and Development (OECD) estimates that Istanbul’s population will grow to 16m by 2017, and to 23m by 2023. Density levels are high compared with other European, or US cities. The city’s peak density of 68,602 people per sq km is well above Manhattan’s.

Congested, smog-choked roads are a problem, with almost 1.8m cars and an additional 84,000 every year. Although there are only 139 cars per 1,000 inhabitants – low compared with European rates – the average travel time for motorised trips increased from 41 minutes in 1996 to 49 minutes in 2006. Carbon emissions from Istanbul traffic rose 37 per cent between 1990 and 2007, from 6.5m tonnes per year to 8.9m.

“The severe traffic congestion despite low car ownership levels is a typical feature of developing countries,” says Haluk Gercek, a transportation engineering professor at Istanbul Technical University and planning consultant.

“It means that there hasn’t been a public transport policy in place and so what public transport there is, is based on buses and minibuses.”

Istanbul has spent the past decade trying to catch up by investing heavily in its infrastructure. A metro system began operating in 2000. Construction is under way to expand the existing network to 231km by 2015, although funding to complete it is not yet secured. Since 2007, a Metrobus (BRT) system has been operating at full capacity along a dedicated lane crossing the Bosphorus Bridge. A planned €751m, 22km metro rail line will service much of the Asian side of Istanbul along another congested traffic corridor.

A $3.5bn rail tunnel running under the Bosphorus is due to open in 2013. Construction was held up for months when underwater excavations uncovered a Byzantine harbour and more than 30 ancient ships. “The municipality’s effort is there but you also have to recognise their challenge. Wherever you dig in Istanbul, you hit layers and layers of history,” says Shahbaz Mavaddat, director of southern Europe and Central Asia for the International Finance Corporation, based in Istanbul.

The IMM has finally drafted a transportation master plan up to 2023, in conjunction with the Japan International Co-operation Agency (JICA). It aims to increase rail and sea-based public transport from their current tiny fraction of the total. “It is not going to happen overnight,” cautions Prof Gercek. “We are 100 years behind other metropolises.”

Part of the problem is that Ankara too wants a piece of Istanbul. The Transport Ministry is backing two deeply controversial projects that did not appear in any of the municipality’s own draft development plans. One is to build a third bridge across the straits, despite criticism that this will destroy reservoirs and the few remaining forests, as well as create unwanted additional traffic.

The second is the Bosphorus Highway Tube Tunnel, a $1bn underwater tunnel whose goal of bringing 80,000 cars to the historic heart of the city each day has also been criticised. It was tendered to a Turkish-Korean consortium with a 30-year operating concession but has stalled over financing difficulties.

There is also the ever-present threat of a massive earthquake. In 1999, a big quake 50 miles east of Istanbul caused 20,000 deaths. A new report by JICA based on four years of research estimates that a quake with an expected size of 7.0 on the Richter scale could kill 35,000 people, destroy 5,000 buildings and cause losses of $100bn.

The city has an earthquake readiness master plan that was developed in 2006 with several universities, but there has been little progress on retrofitting poor housing stock.

Nevertheless, analysts are upbeat about the outlook for Istanbul’s global ambitions, as long as officials continue to invest in infrastructure and planning.

“A young, dynamic population, Istanbul’s efforts to become a financial hub and the increased volume of international trade conducted here bode well for a bright future,” says Ersun Bayraktaroglu, real estate expert and partner at PwC in Istanbul. “But Turkey needs to prepare for this by doing its homework.”

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