Tackling foreign direct investment
TForeign direct investment (FDI) is a key area of concern for the Turkish economy. To improve the numbers, Investment Support and Promotion Agency of Turkey (ISPAT) President, Arda Ermut, has announced plans to attract foreign investors. In an interview with daily DUNYA, Ermut outlined ISPAT’s plans.
►What are the latest f gures for Turkey’s FDI?
Compared to 2016, the decline in FDI was almost in line with the decline globally. So, it was not unique to Turkey; there is a recession in the global sense. According to data released by the United Nations Conference on Trade and Development (UNCTAD,) the global FDI figure was $1.81 trillion in 2016 and drecreased to $1.52 trillion in 2017. In Turkey, the 2017 figure was $10.8 billion. In 2015, we set a record of $18 billion; a year later, it had dropped to $13.3 billion, a relatively high figure despite the negatives the country faced such as the July 15 coup attempt.
►Do you have any new plans to draw further nvestment to Turkey?
Our goal is to attract 1.5 percent of the global annual FDI in the short term. Based on 2017 figures, this represents $22.5 billion on average. To achieve this, we have identified sectors in order of priority and determined the regional investment needs of Turkey by filtering them according to competition analysis. We used a three-step methodology to identify the priority sectors and target countries. In the first stage, we set up sector priority rankings by analyzing the FDI potential and strategic importance of attracting foreign investment for each sector. In the second stage, we filtered these sectors acording to their contribution to the competitive power of Turkey by considering the criteria investor companies look at in choosing target markets. In the third stage, we set the target countries for each sector according to their FDI potential.
Factors such as capital inflow, job creation, export potential, technology intensity, reducing Turkey’s import dependence and thus the foreign trade deficit and current account deficit were taken as the basis for prioritizing sectors.
The key sectors that emerged were energy, including renewables, aviation/defense, life sciences (health and biotechnology), automotive, machinery, chemistry, information and communication technologies, logistics-infrastructure-transportation and business services. Then we looked at which countries to target. For example, in the automotive sector we allocated resources to leading countries like Germany, Japan, the U.S., France and South Korea. In addition, we analyzed the companies’ investment needs according to the ecosystem in Turkey.
►How w ll FDIs mprove the Turk sh economy? Do you have goals?
The yield of FDIs is very important. We have chosen targets that make Turkey a regional center for high-tech, exports and R&D and a commercial and financial center for Europe and the Middle East/ Africa. Our primary goal is to create the perception that Turkey is a safe haven for FDIs. Thus, IPSAT’s secondary target is to be a reliable partner and an important information center for international investors.
We plan to proactively advertise our strategic priorities by giving priority to high value-added sectors, by responding to expectations of the global companies from Turkey and by injecting Turkey, especially SMEs, into the global value chain.
►What advantages can Turkey offer to nternat onal nvestors?
Turkey is a one of a kind country with its strategic location, young population, rapidly growing economy and its internal dynamics. Our education system is improving every year. In 2002, the number of university graduates was 287,000; in 2016, it was 801,000. We are in a good position among many European countries in areas such as the number of expert engineers, qualified senior managers and labor cost per hour in the manufacturing sector.
We are also making great strides in infrastructure investments. In recent years, 6 out of 10 global mega projects have been in Turkey. As a result, according to purchasing power parity, Turkey is the 13th largest economy in the world, and 5th in Europe. The economic and political stability acheived in 15 years because of reforms carried out under the leadership of our President have transformed Turkey. ISPAT has worked hard to educate investors about Turkey’s potential, organizing investor meetings during our President’s many trips abroad.
►W ll the FDI strategy contr bute to the local zat on program?
One of the features we look for strategically in FDI is the ability to transfer technology. We contribute to the localization program by supporting the development of technologies and products that cannot be locally produced by using built-in international investments as a leverage.
We can also make a contribution by attracting international companies that operate in areas where we are foreign-dependent and thus contribute to the reduction of the foreign trade deficit and increase added value domestically.