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- Competitive Elements of Foreign Investment In Turkey
- Foreign Investment In Turkey by Germany
- Foreign Investment In Turkey by United Kingdom
This blog post is on foreign investment in Turkey. As Kingsman Estates we have prepared this report for our clients who are looking to invest in property in Turkey. In this report, you shall find various advantages of investing in Turkey as an international investor with specific examples for different countries.
Competitive Elements of Foreign Investment In Turkey
Turkey, which was the 18th largest economy in the world in 2003 according to the Purchasing Power Parity (PPP), rose to 13th place as of the end of 2019, thanks to the structural reforms it implemented and the robust macroeconomic policies it implemented. With an average annual growth performance of 5.3 per cent between 2003 and 2019, Turkey was one of the fastest-growing countries among the G-20 and OECD countries.
Competitors in terms of attracting direct investment; Leaving Poland, Romania, Czech Republic and Hungary behind in terms of growth rates, Turkey’s economic size tripled compared to the end of 2002 and reached the level of 761 billion dollars. The discipline in monetary and fiscal policies enabled Turkey to take important steps in achieving the budget balance simultaneously with the reduction of public debt.
With this strong fiscal stance, Turkey overcame the Global Financial Crisis of 2008-2009 with minimal impact, while also making use of the opportunities provided by the fiscal policy when necessary. Its strong financial stance has highlighted Turkey as an important actor that strengthened its hand by using its fiscal policies during the Covid-19 crisis period.
Wide Domestic Market And EU Strategic Position
Per capita income increased depending on the growth in the Turkish economy. National income per capita, which was around 3,600 dollars in 2002, rose to 9,213 dollars by the end of 2019. This increase in per capita income also significantly increased the number of people in the middle and upper-middle-income groups.
In 2002, 45 million of the 66 million population were in the lower-income group, while only 20 million of the population were in the middle and upper-middle-income group. As of the end of 2020, 64 million of the 83.6 million population were in the middle and upper-middle-income group. Thanks to these developments, the purchasing power of households have increased significantly.
This again contributed to Turkey’s economic growth as domestic demand. In addition, the Customs Union Agreement with the European Union and the Free Trade Agreements signed with 28 countries paved the way for product and service producers in Turkey to have direct access to a market with a population of approximately 990 million.
Turkey’s strategic location stands out as one of the most important advantages it offers to international investors. The fact that 1.3 billion people and an economy of 26 trillion dollars can be reached in the important centres of Europe, North Africa, the Gulf Region, Russia and Central Asia within a 4-hour flight distance has made Turkey an important production and management base. Many multinational companies (Toyota, Ford, Nestle, Hugo Boss, BSH, GE etc.) have positioned their production and/or management base in Turkey.
Turkey’s demographic structure is shown as an important factor for both economic growth and international investments. In Turkey, the youngest country in Europe with a population of 83.6 million and an average age of 32.7, the number of young people who can join the workforce continues to increase.
While Turkey’s labour market is growing with newcomers, it also increases its quality. Each year 890 thousand students graduate from universities and 500 thousand students from vocational and technical high schools. Thanks to this trained workforce potential, international investors have the opportunity to easily reach the engineers and competent managers they need.
Uninterrupted Reform Process
Many regulations have been successfully implemented to improve Turkey’s investment environment. The first of these was the Foreign Direct Investment Law adopted in 2003 and the related regulations. The investment incentive regulations that have been announced since 2006 and the start of the Prime Ministry Investment Support and Promotion Agency in 2007 are also shown as important steps in this field. In addition, with the new Turkish Commercial Code enacted in 2012, compliance with the European Union legislation has been increased.
Liberal Investment Enviroment
The business created with all the advantages and reform process and a friendly investment environment has further increased Turkey’s attractiveness to international investors. Mutual Incentives and Protection Agreements and Double Taxation Treaties are among the other advantages offered to international investors.
The reform efforts for Turkey to rank among the top 20 in the World Bank’s Ease of Doing Business Index are also ongoing. In this context, a very important step was taken with the “Law Amending Certain Laws to Improve the Investment Environment”, which entered into force in March 2018.
The law, on the one hand, makes the establishment of a company easier, on the other hand, contains important regulations regarding commercial activities. Ranking 60th in the Ease of Doing Business index in 2017, Turkey is the fruit of these efforts; It ranked 43rd in 2019 and 33rd in 2020.
Domestic and international companies carrying out R&D activities in Turkey can also benefit from various R&D incentives. In order to benefit from R&D incentives, many international companies open R&D centres in Turkey and provide a significant amount of employment.
There are over 1,200 R&D centres in Turkey, and nearly 210 of them belong to global companies. Global companies such as Ford, Fiat, Daimler, AVL, Siemens, Samsung, Toyota, Bosch, Unilever, Renault and Cisco have R&D centres in Turkey. Ford’s R&D centre in Turkey is the third-largest centre of the company globally. The R&D centre of Fiat in Bursa is the only centre of the company outside Italy that serves the European market.
Samsung Electronics, on the other hand, opened its R&D centre in Istanbul Technopark in 2015 and its innovation centre in 2016. R&D expenditures, which were around $ 4 billion in 2002, are now close to $ 25 billion. While the number of researchers was around 50 thousand in 2002, it has exceeded 240 thousand today.
CONSTRUCTION AND REAL ESTATE
Project-based growth will continue in the construction sector
The construction sector, which has been one of the most important contributors to the growth performance of Turkey in recent years, increases this contribution especially under the leadership of huge public investments. The real estate sector, on the other hand, has a constantly lively structure with the effect of tax advantages.
The direct reflection of the discount provided in housing loan interest on sales also reveals the potential in the sector. Parallel to the growth experienced in the Turkish economy in the last 18 years, the share of construction and related sectors in GDP reached 30 per cent. Both the huge public projects that have increased in the last 10 years and the projects announced to be realized within the scope of the targets of 2023 reveal that public and private sector investments will increasingly continue in the coming period.
These developments also point out that project-based growth will continue in the construction sector. It is noteworthy that besides private sector investments, large-scale infrastructure projects have also contributed to the sector’s recent growth.
All of the most important projects such as Osmangazi Bridge, Yavuz Sultan Selim Bridge and connection roads, Eurasia Tunnel, Istanbul Airport, 1915 Çanakkale Bridge, which are planned to be opened in the coming years, as well as integrated health campuses and city hospitals, which have been put into service in many provinces, with a public-private partnership model. is being implemented.
“Public investments and urban transformation will support growth”
In the third quarter of 2020, construction expenditures increased by 30.8 per cent at current prices compared to the same quarter of the previous year and amounted to 182.1 billion TL. In the third quarter of the year, construction expenditures reached the highest level of the last 11 quarters as a result of the significant growth of construction activities with the support provided.
It is predicted that public investments and the urban transformation process will continue to support the growth momentum in the construction sector in the upcoming period. On the real estate side, 2020 was a lively year as a result of interest discounts and campaigns. According to TURKSTAT data, housing sales increased by 11.2 per cent in 2020, despite the Kovid-19 outbreak, reaching 1 million 499 thousand 316.
House sales to foreigners in 2020 decreased by 10.3 per cent compared to the previous year and became 40,812. Istanbul with 19 thousand 175 Antalya ranked first with 7,735 residences and Ankara followed Istanbul with 2,746 residences. Since 2014, when the Reciprocity Law came into force, housing sales to foreigners have reached 220 thousand 351 in total.
Foreign Investment In Turkey by Germany
“Turkish-German relations are based on a versatile, traditionally close and friendly history. Our countries are more closely tied than any other country in the world. More than 3 million people of Turkish origin live in Germany and many people who have been in Germany for a long time in the past also live in Turkey. We have close economic relations with Turkey. In addition to many small businesses, more than 7,500 German companies, including German industrial giants such as Siemens and Bosch, who have been here for more than 100 years, are operating in Turkey. Germany has been Turkey’s most important partner in almost every aspect of the economy for many years. Germany, which has a 9 per cent share in Turkey’s total exports, is the most important market for Turkey. After reaching a record value of 37.7 billion Euros in 2017, the bilateral trade volume between the two countries decreased to 33.4 billion Euros in 2019, depending on the cyclical developments. “I see Turkey as ready to take the necessary measures” Turkey has an important position at the intersection of Asia, Europe and the Middle East. The young population also creates a great potential for many sectors. Foreign investments are very important for the Turkish economy to benefit from this great potential. In my opinion, it is also an important criterion for Turkey to increase its attractiveness as a technology base. Because the training of a qualified young workforce plays a decisive role. With the focus on science and foreign languages in education and the development of vocational education, it is also very important to turn to modern production and quality standards.” Ambassador Of Germany
Foreign Investment In Turkey by United Kingdom
“The UK Government attaches great importance to our bilateral trade relationship with Turkey. Our bilateral trade has increased by 70 per cent in the last ten years, reaching the level of GBP 18.9 billion. The UK is Turkey’s second-largest export market and one of its largest foreign direct investment partners. Our trade relationship with Turkey continues to be extremely important for us after we left the EU. After our separation from the EU’s Customs Union, our common goal is to repeat our existing trade regulations as much as possible under the umbrella of a bilateral free trade agreement. Investment is also an important part of our relationships. In the last 15 years, the total capital flow from the UK to Turkey has reached 11 billion dollars. Last year, the UK became the second-largest investor in Turkey. UK companies such as Vodafone, BP, Shell, BAE Systems and Rolls Royce are among Turkey’s largest foreign investors. Many British investors not only serve the Turkish market but see Turkey as a strategic place for export to the entire region. There are many reasons why British companies, serving in many different sectors such as telecommunications, food and beverage, energy, medicine, information and communication technologies, prefer Turkey for their strategic investments. Ease of doing business in Turkey, strong and resilient local economy, advantageous population characteristics and highly skilled local workforce are just a few of these reasons. Of course, stability, rule of law and equal conditions with local investors are also important for foreign investors. It is very important for the business world to have confidence that their investments will be treated fairly, that there will be no discrimination, and that policy-making will take place in a stable, transparent and predictable manner. “Our investment-trade relationship is very comprehensive and growing day by day” We believe that there are great opportunities for cooperation in priority areas such as defence, renewable/clean growth, life sciences and medical technologies, smart cities, artificial intelligence and data. Current key sectors in our trade relationship, such as the automotive sector, high-tech products, textiles, electronic products and metals, will continue to be a very important element of our economic relations. In addition, the UK government is determined to support British industry efforts to partner with Turkish defence and aerospace firms. Collaboration in third countries, especially in the infrastructure sector, has a huge benefit. The trade and investment relationship of our countries is really comprehensive and growing day by day. As we leave the EU, we will be much more eager to find new business opportunities for the UK and Turkey.” -Ambassador of United Kingdom