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FDI Levels in Turkey Hit Five Year High As Investors Seek Geopolitically Secure Assets

Turkey reported a noteworthy increase in incoming foreign direct investment (FDI) in 2021. A staggering influx of USD 14.2 billion made its way into the country during the past year, highlighting its rapid economic recovery from the pandemic stricken 2020.

Burak Dağlıoğlu, the head of the Presidency’s Investment Office, stated that the year-on-year increase in FDI reached a gargantuan 81%, surpassing the global average surge of 77% reported by the United Nations Conference on Trade and Development (UNCTAD), marking Turkey as one of the globe’s major investment magnets. The transcontinental country registered its highest FDI figure in five years. “This figure is above the FDI inflows that came to our country since 2016,” said Dağlıoğlu, “Turkey became one of the ten most invested-into European countries”.

Equally impressive, however, is how Turkey was able to deal with the economic crisis of the pandemic; as global FDI dropped 35% in 2020, Turkey was able to limit its FDI decrease to 18%.

Briding an increasingly unstable world

Turkey’s ability to register an FDI value higher than pre-pandemic years accentuates its robust strategy for attracting foreign investors and global companies to its shores, an objective bolstered by the nation’s strategic location.

As a bridge between the Asian and European continents, Turkey’s role in the realm of global supply chain has always been a vital one, and it is working to enhance it, as Dağlıoğlu announced, saying “Our country is strengthening its position in global supply chains and international investors are increasing their assets in Turkey,”.

As the pandemic has derailed global shipping routes, more companies are becoming highly proactive in terms of where they base their manufacturing, assembly, and distribution facilities, and Turkey’s location, infrastructure, and business environment has been drawing the attention of some of the biggest names in the world. 

Global goliaths such as Sweden’s IKEA, Poland’s LLP, and Germany’s Boehringer Ingelheim, among many others, announced their intention to invest within the Turkish country.

Dağlıoğlu credits this massive influx of investment and company relocation to the fertile business environment Turkey has nurtured, alongside the wide array of resources it provides for corporations setting up shop on its soil, saying “Turkey is attracting significant investments from global players thanks to its entrepreneurial business culture, young and tech-savvy population, talented pool of engineers and competitive products and services,”.

He continued by breaking down the investments, saying, “Our ecosystem received about $1.6 billion in 294 investment rounds in early-stage investments […] International investors participated in 44 of the 294 investment rounds, while they accounted for 89% of the overall investment amount”.

Turkey aims to continue growing the FDI surge, with the current objective set at a 1.5% increase for the period between 2021-2023. The plan is to also diversify into critical sectors, as Dağlıoğlu explained, saying, “Startups that are rapidly growing their scale in areas such as e-commerce, financial technology, gaming, logistics technologies, life sciences, and deep technologies will complete significant investment rounds in the coming years,”.

Turkey is certainly cementing its global footprint, as it increased its share of global FDI in 2020 to 1% of the world’s total, a 40% increase from 2019. The nation’s diligent planning and tireless execution mark the beginning of rapid growth and, if things go well, unhindered prosperity.

A western surge

Turkey continues to garner the attention of investors from all over the globe, not just those from neighboring countries, as evident from the statistical breakdown of the source of FDI. 

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The majority of FDI (60%) came from Europe, while 24% came from Asia, and the Americas accounted for 16%. The UK was the biggest source of FDI into Turkey, followed by the United States, the Netherlands, Switzerland, UAE, Germany, Luxembourg, South Korea, and Japan, while Ireland rounds up the top ten FDI source markets.

Dağlıoğlu pointed out that retail and wholesale trading, manufacturing, ICT, financial services, and logistics made up the bulk of sectors to receive the influx of FDI, stating that retail and wholesale trading investments came into the country’s technology startups operating within that realm.

As for the manufacturing sector, one of Turkey’s most prominent industry strata, Dağlıoğlu informed the public which subcategories got the lion’s share of FDI, saying, “Looking at the sub-divisions of manufacturing, which is another important sector in investments, we see that the production of transportation vehicles, chemicals, computers, electronics and optical equipment, food and beverage products stood out.”

He also highlighted that there were 309 mergers and acquisitions within Turkey in 2021 totalling USD 3.07 billion, half of which came in the form of foreign entities purchasing stocks, while there were also seven privatization transactions totalling USD 6.84 billion during the same year.

Skewed statistics

Another factor that plays a role in increasing the influx of FDI into Turkey, albeit not necessarily significant in terms of monetary value, is the Turkish citizenship by investment program (CIP).

While not an objective for mega-corporations or puristic investors, the CIP has generated massive interest since its launch, having approved more than 10,000 applications to date. 

However, the numbers tell an interesting tale, as, opposed to the European dominated FDI list, Asian applicants dominate the majority of citizenship by investment applications. Out of the top 18 nationality pools to apply for the Turkish CIP, 89% of those applications came from Asian countries, while only 1.6% came from Europe. A stark contrast to where the majority of FDI is coming from.

These figures, however, paint a much more interesting picture, as it highlights Turkey’s attractiveness as a pure investment destination, something which should entice anyone considering its CIP.

The bustling economic landscape Turkey has created makes for an enticing prospect for those looking to have their cake, and eat it too. Rarely is it possible for investment migration programs to offer a package that ticks both the investment and immigration boxes so assiduously, providing applicants with the chance to get a second passport and make a nifty profit.

While the Turkish CIP may not directly tip the scales in terms of FDI value, it can indirectly offset where that FDI is coming from. The more popular the Turkish brand becomes throughout Asian and African countries with mega-corporations, the more likely those corporations can come to understand Turkey’s value as a global economic lynchpin. 

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