Turkey Investment Risk Analysis
Today Turkey is preserved as one of the countries that offer a solid ground for foreign investment. According to the Republic of Turkey Prime Ministry Investment Support and Promotion Agency [PMISPA] (2015), the inflow of Foreign Direct Investment [FDI] has reached 12.5 BUSD in 2014 and the amount of countries with foreign capital is constantly growing. While the biggest Turkey’s assets are mainly related to soil and population, a set of political reforms targeted to support the investment, the close possibility to join the EU contribute largely to growing interest of foreign investors. On the other hand, doing business in Turkey requires ...view middle of the document...
PMISPA (2015) published the announcement of the Turkish government related to the Turkey main targets by 2023 within infrastructure development:
* Increasing the length of high-speed railway lines to 10,000 km from 888 km.
* Reaching 7,500 km of motorways from 2,236 km in 2013.
* Increasing the passenger capacity of airports from 165 million to 400 million.
* Reaching a 32 million TEU handling capacity for container transport.
* Having a 10 million DWT shipbuilding capacity.
* Increasing the number of marinas to 100 with a yacht capacity of 50,000.
The geographical advantages, both touristic and strategic benefits, as well as high governmental aspirations within the infrastructure development make Turkey a lucrative venture for investment.
Over the last ten years Turkey has experienced a thorough economic transformation and is today based on a solid economic ground. Currently, it is the 17th largest economy in the world, the 6th largest economy in Europe and its GDP has increased within the last 15 years reaching approximately USD 800 billion in 2014 (CIA, 2013). The purchasing power of population is increasing, which leads to higher demands for new products and services. Moreover, the Turkish government has forecasted the further increase of GDP per capita to US$20,000 by 2023 (PMISPA, 2015). All the above mentioned factors contribute positively to establishing good conditions for business opportunities in Turkey.
The Turkish region is rich in resources, which supports the vast development of many industries. The main industries include construction, real estate industry, steel and cement industry, which is today the 7th biggest in the world (CIA, 2013), as well as transportation and energy industries. The demand in the construction industry is highly driven by two factors: the urbanization trend of Turkish population and the flow of the Middle Eastern capital, which sees Turkey and the overall Turkish banking system as a secure spot.
A constantly expanding market based on the manufacturing industries increases potential profitability of business in Turkey and, therefore, makes it more attractive for foreign investors.
Political situation in Turkey is not exactly favorable at the moment. The Parliament elections are to come in November and the society is awaiting possible changes in country politics and economics. Friedman (2015) warns that in the today’s Turkish society the human rights, free speech, justice and basic human rights are also under discussion and serious political pressure. Therefore, the current situation can be perceived as a threat for potential investments.
One of the biggest impacts on doing business in Turkey would be possible acquiring the EU membership. If Turkey entered the EU, it would become the biggest EU country and it will only be exceeded by Germany in population. This fact would raise the importance of Turkish market for investments.