Last Updated on 14/06/2023
For international investors looking for a dynamic and strategic market, foreign direct investment in Turkey has emerged as an attractive possibility. Moreover, Turkey presents several opportunities for entrepreneurs wishing to increase their global footprint. Thanks to its advantageous location at the crossroads of Europe and Asia, a thriving domestic market, a competent workforce, and a welcoming investment environment, Turkey provides alluring opportunities related to FDI.
Highlights
- The Investment Office of the Presidency of the Republic of Turkey, in collaboration with pertinent governmental and private sector organizations, created the Türkiye’s FDI Strategy (2021 – 2023) Report to promote FDI in Türkiye.
- The government’s plan is to increase Türkiye’s market share in global FDI inflows and attract value-added investments in key sectors of the Turkish economy.
- The Ministry of Industry and Technology reports that as of mid-2022, there were 78,257 enterprises in Turkey with foreign funding, up from 5,600 in 2002.
- Additionally, the Central Bank of the Republic of Turkey in March 2023, Foreign Direct Investment (FDI) grew by 741.0 USD million.
Sector distribution and Source countries of Foreign Direct Investment in Turkey
Foreign direct investment in Turkey involves over a number of industries, including manufacturing, finance, energy, real estate, and telecommunications. Besides, traditional recipients of major FDI inflows include the manufacturing sectors of the automotive, textile, and electronics industries.
Moreover, European countries including the Netherlands, Germany, and the United Kingdom as well as members of the Gulf Cooperation Council (GCC), such as Qatar, Saudi Arabia, and the United Arab Emirates, are significant providers of foreign direct investment (FDI) in Turkey. Asian nations like China and South Korea have invested in Turkish industries.
FDI in Turkey recent trends and challenges
Over the years, Turkey has seen swings in FDI inflows. In fact, Turkey has recently suffered a number of difficulties, such as political unpredictability, and economic volatility. This impacted investor confidence and FDI flows. Despite its potential, Turkey has trouble luring consistent FDI inflows. In fact, it faced some issues such as geopolitical tensions, regional conflicts, and macroeconomic stability,
FDI in Turkey reviews 2023
Scope of the review
Rather than relying on a prior approval/review procedure, the foreign direct investment in Turkey regime uses a post-closing notification approach. The investors must submit in this case a notification to related authorities. The General Directorate of Incentive Practices and Foreign Capital of the Ministry requires FDI enterprises to submit specific notifications via the E-TUYS online system. Therefore, FDI companies submit all necessary notifications to the General Directorate of Incentive Practices and Foreign Capital of the Ministry of Industry and Technology. Yet, these notifications are not subject to the approval of the relevant ministry. Or, to put it another way, notification alone suffices. To that purpose, only businesses opening a liaison office in Turkey must get authorisation in accordance with the FDI Regulation.
Which deals do the FDI reviews involve?
FDI companies’ must report the changes in capital and shareholding structures within a month. Moreover, these companies must fill out standard form that requesting general informationsuch as its trading name, address, tax ID, and summaries of their subsidiaries and shareholding structure.
Separately, some sector-specific laws contain FDI-related provisions as well. These laws might call for additional approvals from relevant agencies like the Ministry of Environment, Urbanization and Climate Change, the Energy Market Regulation Authority, the Ministry of Treasury and Finance, and the Banking Regulation and Supervision Agency before investment.
How foreigners can protect themselves in FDI in Turkey
The idea of investment freedom serves as the foundation for the Turkish FDI regime. According to the FDI Law, international investors can make foreign direct investments in Turkey and must be accorded the same rights as domestic investors. Having said that, some industries have particular regulations because of added worries about public interest and security. In order to achieve this, foreign investors should consider whether the anticipated transaction necessitates additional FDI requirements and filings under sector-specific regulations.
Furthermore, it’s important to analyze if the proposed transaction is also subject to the requirement of notifying the TCA in cases involving potential mergers, acquisitions, or joint ventures. Besides, foreign investors should be aware that failing to abide by the notification requirement could result in an administrative financial penalty equal to 0.1 percent of the turnover achieved during the financial year prior to the decision date.
Government incentives to attract FDI in Turkey
The Turkish government ensuresw a wide range of investment incentives to attract foreign direct investment in Turkey. These ,ncentives include general, regional, strategic, and project-based incentives.
The following advantages are offered to investors by Turkey’s incentive program. They include a reduction in corporate taxes, customs duty exemptions, value-added tax (VAT) exemptions and refunds, employer support for social security premiums, an allowance for income tax withholding, land allocation, and interest rate support for investment loans.
However, competitive high-tech industries have priority. The incentive program also includes regional incentive programs to lessen regional economic gaps and boost competitiveness. Moreover, the reduction of the current account deficit and unemployment, the elevation of support instruments, the encouragement of clustering activities, and the encouragement of investments that advance technology transfer are other main goals.
Besides, research and development (R&D) incentives are available to foreign companies who do their R&D in Turkey. In fact, the Turkish Technology Development Foundation (TTGV) has programs that provide cash loans for R&D projects and/or cover R&D-related expenses. The Scientific and Technological Research Council of Turkey (TUBITAK) also has special programs for entrepreneurs in the technology industry.
FAQ
What is the foreign direct investment of Turkey?
Foreign Direct Investment (FDI) in Turkey refers to the investment made by individuals, companies, or entities from foreign countries into Turkey’s economy.
Who is the largest foreign investor in Turkey?
With $977 million, Italy had the largest capital investment in Turkey, followed by the US ($798 million) and the UK ($693 million).
What is the foreign direct investment in Turkey 2023?
the Central Bank of the Republic of Turkey in March 2023, Foreign Direct Investment (FDI) grew by 741.0 USD million.
Why is Turkey attractive for FDI?
Mainly Turkey’s advantageous location. It acts as a link between Western nations and those in the Gulf. The country is a desirable place for FDI because of its proximity to markets in the West and the Middle East.
Who is Turkey main trading partner?
The EU is by far Turkey’s biggest trading partner for goods. In 2022, 41% of Turkey’s exports of products were made to the EU, while 26% of its purchases of goods were made from the EU. In 2022, the EU and Turkey had a combined trade in goods of €198.1 billion (3.6% of the EU’s overall commerce with the rest of the world).
