Why to Invest In Turkey ?

 Top 10 Reasons To Invest In Turkey

Turkey is known for its hospitality and geopolitical location, which has made it an important center for attracting local and foreign investors in various sectors, especially the tourism sector and the real estate sector, which has attracted great interest from investors. The beauty of its nature, Asia and Europe, with a high percentage of the youth population, was one of the main reasons that led investors to prefer Turkey to invest, especially the values that characterize Turkey, which made it the focus of interest of foreign investors in general, and turned it into a country open to investors and foreign capital.

Each investor before investing in a place asks why he has invested in this place, so we have identified 10 important reasons that could serve as an answer to investors interested in investing in Turkey, whether for local investors or foreign investors.

Table of Content

Top Reasons to Invest in Turkey

1. Improved and Thriving Economy

2. The Increase Rate of Youth Population

3. Skilled and Competitive Workforce

4. Flexibility of Investment Atmosphere in Turkey

5. The Infrastructure

6. The Perfect Geographical Location

7. Largest Power Plant and Terminal in Europe

8. Low Costs of Taxation in Turkey

9. Membership in the European Customs Union

10. Large National Markets

Top Reasons to Invest in Turkey

1. Improved and Thriving Economy

Turkey has entered a new millennium with an almost collapsed economy, but since 2002 the country's economy has begun to improve rapidly. During this period, GDP, the country's most important measure, jumped from 231 billion dollars to 820 billion dollars. Which witnessed steady growth between 2002 and 2015, recorded a 5.1% annualized increase in GDP. According to the Organization for Economic Co-operation and Development (OECD), Turkey is expected to be among the fastest growing economies in 2012-2017, according to IMF data In 2013, Turkey became the sixth largest economy in Europe and 16 globally, attracting more than $ 135 billion in international capital (foreign investment) over the past 10 years. During this period, exports increased by more than 245%.

2. The Increase Rate of Youth Population

When investing in a place requires the presence of qualified youth and skilled manpower, Turkey's young population is very large compared to European countries. Turkey is the most populous country in Europe and more than half 30, which means that any investor who opens a project in Turkey will not suffer from the problem of employment and labor.

3. Skilled and Competitive Workforce

According to the statistics of the Turkish Statistical Institute, Turkey has 29 million young people, including skilled and qualified workers. About 200 universities annually graduate 600,000 young people and about 700,000 graduates from secondary schools, institutes, and vocational schools. Those qualified for work, creating a competitive environment that drives workers towards creativity and mastery of work.

4. Flexibility of Investment Atmosphere in Turkey

It is known that in many countries there are barriers to identifying foreign investments, but Turkey, a member of the Organization for Economic Co-operation and Development (OECD), has begun to raise such obstacles to foreign investors starting in 1997. Today Turkey reached a stage where a company is established every 6 days, and the State deals with all investors to equality, creating a competitive environment between them. According to the Ministry of Economy, there are more than 37.000 companies with foreign capital in Turkey. Turkey also provides the possibility of reviewing international courts and tribunals to solve the intractable problems facing foreign investors. It also increased Turkey's appeal to foreign investors.

5. The Infrastructure

One of the main reasons for foreign investors to invest somewhere is to provide the necessary infrastructure for investment and to reduce the cost of transportation. If we look at the basic infrastructure, such as transport, communications, energy, and technical infrastructure, Turkey has seen a boom this has made Turkey a center for attracting foreign investors. The briefing of three seafarers in Turkey has provided them with very cheap maritime transport, in addition to its connection with Central and Eastern Europe with a network of railways.

6. The Perfect Geographical Location

Turkey's central location linking Asia and Europe has historically made it a natural bridge connecting the two continents. Turkey has, through its location, embraced many commercial routes linking the East and the West. Today, Turkey enjoys a sensitive strategic location to reach more than 1.5 billion people in each Asia, Europe, and Africa, and it is the most reliable transit point in trade relations.

7. Largest Power Plant and Terminal in Europe

Turkey plays an active role in energy transfer between Asia and Europe. It contributes to the transfer of energy from east to west and the transfer of funds from the west to the east. On the other hand, 70% of the world's energy sources are spread in Turkey and surrounding countries is an important center for the transfer of energy to Europe, which is one of the most important stations of energy consumption in the world.

8. Low Costs of Taxation in Turkey

In order to encourage investors to invest in Turkey, the institutional profit tax applicable to foreign investors has been reduced by 33% to 20%. In some cases, foreigners are exempt from this tax in whole or in part. Investors are also encouraged in some areas allocated by the State such as land allocation and other incentive policies.

9. Membership in the European Customs Union

The European Customs Union, which aims to increase economic activities and offers. Turkey has been a member of this customs union since 1996, and there are 20 free trade agreements between the parties to this union. These trade relations are increasing day by day through the signing of new agreements.

10. Large National Markets

According to data from the Turkish Statistical Institute, from 2002 to date, the number of Internet users has increased from 100,000 to 33 million, the number of mobile users from 23 million to 70 million, the number of borrowers from 16 million to 58 million, In addition, the number of mobile users has increased from 33 million to 131 million. The number of foreign tourists coming to Turkey from 13 million to 40 million tourists annually shows that Turkey has a large domestic market.

These ten factors are important reasons for investors to invest in Turkey, in addition to these reasons there are many advantages and characteristics that characterize Turkey, which turned it into an important center of attracting domestic and foreign investors in general, especially in recent years, we note that Turkey aims to raise foreign investments coming to it, through the issuance of several laws and the adoption of public policies and the establishment of multiple agreements, which will stimulate foreign investors to go to invest in Turkey. These motivational policies of Turkey have been fruitful in a short period of time. Today, they are among the most attractive countries for foreign investments among the countries of the world.

what to invest in turkey ?

The 5 most ideal sectors to Invest in Turkey

Turkey is a perfect country for Investment due to a young, dynamic and skilled workforce in a country of almost 80 Million people. Besides that the Governmental Incentives, Tax Exempts and Free land allocations are making Turkey even more appealing to Investors.

Now lets look at the most profitable and reliable fields for investment in Turkey since the first quarter of 2018.

1) IT and Technology

Recent years Turkey has been showing great importance in researching and developing technology. Today many of the Turkish universities have a technology department and these departments are making it easier for investors to enter this market.

Turkey is a very favorable location for investment especially investors willing to invest in software development, biotechnology, nano technology and electronics. Although there are many national and foreign companies operating is this sector, there are still many market gaps and opportunities that the IT and Technology sector offers.

2) Construction and Real Estate

The Construction and Real Estate market are the most important sectors that keep the Turkish economy up and running. The main reasons for the construction and real estate sector to be so lively is due too a rapid population growth and the city renovation projects. Therefore the construction and real estate sector are still very interesting and profitable for investors for another while.

6% of the real estate sales since September 2017 are from foreign buyers. It has been expected to increase. Besides this foreign investors do not need a residency permit to be able to purchase any real estate. Foreign investors that invest a minimum amount of 250.000 USD have the right to apply for Turkish Citizenship. 

3) Textile and Ready to Wear Clothing

Firstly we have to accept the fact that China has the majority of the textile market in the world. However the Turkish textile and ready to wear sector also has a lot of advantages; the quality that is being presented, the richness in raw materials, meeting special requirements, flexibility and the advantage of Turkey’s location in connection with the major demand of Europe and the Middle East. For these reasons the textile market will always be vibrant and interesting for investors.

In addition to the current incentives, a new incentive program is also been expected to take effect in 2019 for those willing to invest in the textile sector. Besides this investors that are especially investing in textile in the eastern provinces of the country shall be given extra more incentives for encouragement.

4) Energie and Natural Resources

The Energy sector, is a very important sector for almost all economic activities in terms of endless execution. In this respect, the Turkish energy deficit is 130 billion dollars and Turkey is expected to invest in this field to close the deficit. By the comprehensive incentives given to investors in the energy and natural resources sector is showing the interest of Turkey in this field. Investors in; Hydroelectric power, wind energy, solar energy, natural gas, bio-energy and geothermal energy can take advantage of the following incentives;

VAT Exception

Customs Exemption

Tax Discount (40%)

Employer's Share of Social Security Contributions (7 Years)

Interest Support ( Max. 700.000TL)

 

5) Environment and Recycling

The serious steps that are undertaken to eliminate the destruction caused by industrialization, the prevention of environmental pollution and global warming are making the Environment and Recycling sector more important and interesting. Turkey that is still in negotiation regarding the entry to the EU and having signed the Kyoto agreement is showing how important this subject is to the country. The Government has announced to invest between 7 to 9 Billion Euro to this sector because the subject is important for all of us.

In this regard, Turkey will support domestic and foreign investors in recycling by reducing value added tax, customs tax, investment in allocation, interest support, tax relief and many other supports.

FOREIGN DIRECT INVESTMENT

According to the UNCTAD World Investment Report 2020, FDI inflows declined significantly to USD 8.4 billion in 2019, edging down from USD 13 billion in 2018 (-35%). The slowdown was due to global economic uncertainty as well as weak economic growth. FDI stock stood at USD 165 billion in 2019, a decrease if compared to USD 188 billion in 2010.  Finance, manufacturing and energy are among the sectors that attract the highest amount of FDI in Turkey, accounting for more than 60% of total stocks. In terms of stocks, the Netherlands has the lead, accounting for 16.1% of total foreign investment, followed by the United States at 7.6% and the Gulf countries - mostly Qatar - at 7% (Central Bank of the Republic of Turkey). FDI flows to Turkey dropped by 32% on the year to USD 2.9 billion in the first half of 2020 amid a global decline in investments, UNCTAD data shows. The rate of decline was broadly in line with broader regional trends in West Asia during the period. However, preliminary data from the Turkish Central Bank point to an investment recovery in the third quarter of last year, with FDI stocks reaching USD 185 billion by the end of October.

Turkey has adopted a series of legislative reforms to facilitate the reception of foreign investment, such as the creation of the Investment Office of the Presidency of the Republic of Turkey, a showcase of the efforts undertaken to attract foreign operators. FDI inflows improved in the light of development of public-private partnerships for major infrastructure projects, the measures to streamline administrative procedures and strengthen intellectual property protection, the end of FDI screening and the structural reforms carried out as part of EU accession process. The factors hindering FDI development include the instability of the Turkish lira, as evidenced by the currency crises that broke out first in August 2018 then in October-November 2020 bringing its value to record lows, inflation that have reached double-digit rates and the proximity of conflicts in the Middle East. Nevertheless, Turkey's ranking in the World Bank's Doing Business Report 2020 continued to improve, as Turkey was listed as the 33rd out of 190 economies with regards to the ease of doing business in 2020, up by 10 positions from a year earlier. Improvements regarding tax payments in particular helped Turkey obtain a better ranking this year.

 

 

Foreign Direct Investment 2017 2018 2019

FDI Inward Flow (million USD) 11,020 12,981 8,434

FDI Stock (million USD) 197,472 147,268 164,906

Number of Greenfield Investments* 223 217 217

Value of Greenfield Investments (million USD) 9,104 16,050 3,904

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Turkey Eastern Europe & Central Asia United States Germany

Index of Transaction Transparency* 9.0 7.0 7.4 5.0

Index of Manager’s Responsibility** 5.0 5.0 8.6 5.0

Index of Shareholders’ Power*** 6.0 6.0 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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WHAT TO CONSIDER IF YOU INVEST IN TURKEY

Strong Points

Advantages for FDI in Turkey:

Turkey's repeated attempts to join the European Union have helped to establish European regulations and trade standards, which have substantially liberalised the economy. 

The Government is working to attract FDI into technology, textiles, services (health, education, public transport), telecommunications, shipbuilding, electronics and bio-technologies. 

Because of its demographic vitality, the country has a developing young middle class population with increased purchasing power and orientation towards consumption. 

The relatively low cost of labour

Turkey has a strategic geographical location that allows it to be a regional hub between Europe, Asia and the MENA economic zone.  

The Turkish market counts 85 million consumers

Weak Points

Some of the disadvantages for FDI in Turkey include:

A bureaucracy that may be cumbersome to navigate

Frequent changes in the legal and regulatory environment

Strong dependence on exports and hydrocarbon imports

Exchange rate uncertainty and the consequences of a public debt constantly rising

Elevated regional geopolitical risks

Currency plunge and high inflation

Government Measures to Motivate or Restrict FDIThe Turkish Government has played a large role in initiatives to make the country a more attractive destination for foreign investment and business operations. The Turkish government offers a comprehensive investment incentives program: general, regional, strategic and project-based investment incentives.

Turkey’s incentives program provides the following benefits to investors: corporate tax reduction; customs duty exemption; value added tax (VAT) exemption and VAT refund; employer’s share social security premium support; income tax withholding allowance; land allocation; and interest rate support for investment loans.

The incentives program gives priority to high-tech, high-value-added, globally competitive sectors and includes regional incentive programs to reduce regional economic disparities and increase competitiveness. Other primary objectives are to reduce the current account deficit and unemployment, increase the level of support instruments, promote clustering activities, and support investments to promote technology transfer.

Foreign firms are eligible for research and development (R&D) incentives if the R&D is conducted in Turkey.

Turkey is seeking to foster entrepreneurship and small and medium-sized enterprises (SMEs). Through the Small and Medium Enterprises Development Organization (KOSGEB), the Government of Turkey provides various incentives for innovative ideas and cutting-edge technologies.

Turkey’s Scientific and Technological Research Council (TUBITAK) has special programs for entrepreneurs in the technology sector, and the Turkish Technology Development Foundation (TTGV) has programs that provide capital loans for R&D projects and/or cover R&D-related expenses.

More detailed information can be found at the Presidency of the Republic of Turkey Investment Office website.

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INVESTMENT OPPORTUNITIES

The Key Sectors of the National EconomyIndustry

Turkey has a wealth of natural resources: boron, coal, iron, zinc, chromium, copper, silver. The exploitation of these resources is still under-developed and presents many opportunities. This could also lead to opportunities in heavy industry.  There are also a good number of opportunities in engineering works. The agri-food and textile sectors are looking for equipment. Other key sectors are the automotive industry (especially the market for automobile equipment) and health, which is in increased demand.

Services

Tourism is one of the country's key sectors. It is already well developed in Istanbul, on the Mediterranean coast, in the region of the capital and Cappadocia. In spite of this, the tourist sector still has large potential. Also, Turkey's geographical position offers good opportunities in logistics, transport and insurance.High Potential Sectors

Chemistry - Plasturgy

Energy

Agri-food

Packaging

Building and Public Works/Finishings

Telecommunications

Ores

Industrial subcontracting

Automotive

Privatization ProgrammesConsult the website of the Turkish Directorate of Privatisation AdministrationTenders, Projects and Public ProcurementTenders Info, Tenders in Turkey

Globaltenders, Tenders & Projects from Turkey

DgMarket, Tenders Worldwide: Turkey

 

Sectors Where Investment Opportunities Are Fewer

Monopolistic SectorsMedia, transport, postal services.Sectors in DeclineTextile, agriculture.

 

Finding Assistance For Further Information

Investment Aid AgencyPresidency of The Republic of Turkey Investment Office

Other Useful ResourcesInvest in Turkey (Turkish Investment Consultancy)

Doing Business GuidesDoing business in Turkey (Thomson Reuters Practical Law)

Turkey Country Commercial Guide - The U.S. Department of Commerce

Exporting to Turkey - The UK Department for International Trade

Investment in Turkey - KPMG Guide

Deloitte Tax Guide - Turkey

Doing Business in Turkey - UHY