Investing in Türkiye: a strategic destination for foreign investors

Türkiye has emerged as a pivotal destination for foreign investors, driven by a combination of strategic advantages, economic resilience, and a proactive investment climate. In the first nine months of 2024, Foreign Direct Investment (FDI) flows to Türkiye have been particularly robust, reaching $7.67 billion, an 8% increase from the same period in the previous year.

Geographical and strategic importance

One of the key factors attracting investors to Türkiye is its strategic geographical location. Situated at the crossroads of Europe, Asia, and the Middle East, Türkiye offers unparalleled access to multiple markets, facilitating trade and investment flows. This unique position enables companies to leverage Türkiye as a hub for regional and global operations, making it an attractive location for those looking to expand their international footprint.

Recent trends in FDI

The recent surge in FDI is also attributed to the country’s highly skilled workforce and favorable business environment. In June 2024, FDI inflows saw a significant year-on-year rise of 94.9%, with total inflows reaching $842 million. This growth is largely driven by equity capital, which accounted for $554 million, or 65.8% of the total FDI inflows during that month.

Sectoral insights

Investments across various sectors have shown promising trends:

• The service sector attracted $284 million in June 2024, making up more than half of the total FDI inflows.
• The industrial sector followed with $187 million.
• The agricultural sector garnered $90 million.

Manufacturing and wholesale and retail trade have been particularly strong sub-sectors, with investments of $187 million and $178 million, respectively.

Leading sources of FDI

Geographically, European countries continue to be the leading source of FDI in Türkiye, contributing $423 million in June 2024, which represents 75.4% of the total inflows. Ireland, the Netherlands, and Germany have been the top investing countries, with Ireland leading the pack with $139 million, followed by the Netherlands with $109 million, and Germany with $72 million.

Government initiatives to boost FDI

The Turkish government has been proactive in enhancing the investment climate through various initiatives. The 2024-2028 FDI strategy, launched earlier this year, aims to raise Türkiye’s global share of FDI to 1.5% by 2028, up from the current 1%. This strategy focuses on attracting quality FDI projects that align with Türkiye’s economic development goals, including those in climate, digital, global value chain-related, high-end services, and knowledge-intensive sectors.

Under this strategy, Türkiye plans to target a total of:

• 120 projects in climate FDI
• 240 projects in digital FDI
• 360 projects in global value chain-related FDI
• 270 projects in high-end services FDI
• 360 projects generating high-quality jobs
• 300 projects in knowledge-intensive FDI

This targeted approach is designed to accelerate the country’s technological transformation, increase its global competitiveness, and support regional development.

Real estate investments and economic indicators

Real estate investments have also been a significant draw for foreign investors. In the first nine months of 2024, about $2.2 billion was received through real estate investments from foreigners, highlighting the sector’s attractiveness and potential for growth.

The economic indicators for Türkiye are also encouraging. The country’s Nominal GDP was reported at $245.5 billion in March 2023, and the current account recorded a surplus of $4.3 billion in August 2024. Additionally, Foreign Portfolio Investment increased by $9 billion in June 2024, further solidifying the country’s financial stability and appeal to investors.

Legal and regulatory incentives

For investors considering Türkiye, the country’s legal and regulatory framework offers several incentives. The government has implemented various policies to simplify the investment process, including streamlined procedures for setting up businesses and attractive tax incentives. For instance, the Corporate Tax Rate in Türkiye is competitive, and there are specific tax exemptions and reductions available for investments in certain sectors and regions.

International contributions and trade agreements

Moreover, Türkiye’s membership in various international organizations and its participation in several free trade agreements enhance its attractiveness. The country is a member of the G20 and has customs union agreements with the European Union, among other trade agreements, which facilitate trade and investment flows.

Conclusion

In conclusion, Türkiye presents a compelling case for foreign investors due to its strategic location, skilled workforce, favorable business environment, and proactive government policies. With a strong FDI performance in 2024 and a clear strategy to attract quality investments, Türkiye is poised to continue its growth trajectory and become an even more significant player in the global investment landscape. For those looking to invest in Türkiye, the current economic climate and future prospects make it an opportune time to consider this strategic market.