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Foreign Direct Investment

According to UNCTAD's World Investment Report 2023, FDI inflows to Turkey increased by 8.8% year-on-year to USD 12.8 billion in 2022, whereas the total stock of FDI stood at USD 164.9 billion. Based on the balance of payments data from the Central Bank of the Republic of Türkiye (CBRT), the country received a total of USD 6.48 billion in equity capital inflows as FDI in 2022, slightly lower than the USD 7.1 billion recorded in 2021. Additionally, in 2022, Türkiye garnered USD 6.3 billion in foreign real estate investments and received USD 800 million in FDI through debt instruments. Data by the Turkish Investment Office show that the majority of foreign investments are directed towards the finance (31.6%), manufacturing (24.2%) and energy sectors (10.6%), followed by ICT services (8.8%), wholesale and retail trade (8.4%), and transport and storage (4.7%). In terms of stocks, the Netherlands has the lead, accounting for 15.7% of total foreign investment, ahead of the United States (8.1%), the UK (7.5%), and Gulf countries (7.1%, mostly from Qatar). According to EY, 321 FDI projects were recorded in Turkey in 2022 (+22% y-o-y), creating nearly 14,000 jobs; while the latest data from the OECD shows that in the first half of 2023, FDI inflows to the country totalled USD 4.8 billion, marking a 30% decrease compared to the same period one year earlier.

Turkey’s investment climate is positively influenced by its favourable demographics and strategic geographical position, providing access to multiple regional markets, and has one of the most liberal legal regimes for FDI among OECD members. The country 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, and the publication of the government’s Foreign Direct Investment Strategy 2021-23. FDI inflows improved in the light of the 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 the EU accession process. The factors hindering FDI development include the instability of the Turkish lira, as evidenced by the currency crises that regularly break out and bring its value to record lows, excessive bureaucracy, a slow judicial system, macroeconomic instability, frequent changes in the legal and regulatory environment, and the proximity of conflicts in the Middle East. Overall, Turkey has a favourable business climate, ranking 45th out of 82 countries in the Economist Business Environment and 47th in the 2023 Global Competitiveness Ranking. It is also at the 102nd spot out of 184 countries in the 2023 Index of Economic Freedom.

 
 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 7,68611,84012,881
FDI Stock (million USD) 229,961139,970164,909
Number of Greenfield Investments* 210211265
Value of Greenfield Investments (million USD) 4,7244,3494,173

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 Türkiye Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 9.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 6.0 6.8 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.

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What to consider if you invest in Türkiye

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 85.3 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 FDI
The 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 Economy
Industry
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 Programmes
Consult the website of the Turkish Directorate of Privatisation Administration
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Turkey
Globaltenders, Tenders & Projects from Turkey
DgMarket, Tenders Worldwide: Turkey
 

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Media, transport, postal services.
Sectors in Decline
Textile, agriculture.
 

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