Turkey rises four places in global FDI ranking
The World Investment Report-2019 by the United Nations Trade and Development Organization (UNCTAD) was announced last week. According to the report, in 2018, while global foreign direct investments (FDI) decreased by 13 percent to $1.3 trillion, Turkey attracted $13 billion, a 13 percent increase. This increase pushed Turkey to 21st place in global FDI rankings, up four places. Turkey was ranked 10th in the ranking among developing countries, rising two places.
“Four countries – Turkey, the United Arab Emirates, Saudi Arabia and Lebanon – absorbed approximately 90 per cent of FDI in West Asia. Turkey was the largest recipient despite slower than usual economic growth and uncertainty surrounding the Turkish lira. FDI in Turkey from Asian economies increased from 12 percent to 27 percent and was instrumental both in driving FDI upwards and its diversification,” the report said.
The $6.3 billion Star Refinery built by the State Oil Company of the Azerbaijan Republic, one of the largest foreign investments in Turkey, started operating in late 2018. The largest M&A deal was the acquisition by DFDS (Denmark) of a 98.8 per cent interest in UN Ro-Ro Isletmeleri, a provider of deep-sea freight transportation services, for $1.2 billion.
Turkey’s share in global FDI flows was one percent in 2018. Among developing countries it was two percent and in developing Asia it was three percent. In West Asia it was 44 percent. Turkey became the largest FDI receiving country in West Asia. Signing 8 free trade agreements and bilateral investment in 2018, Turkey also stood out globally as the country with most completed bilateral
‘We maintain our investment destination image’
International Investors Association (YASED) President Aysem Sargin said that Turkey maintained its important investment destination image for international direct investors with its large and dynamic domestic market, young population, advanced entrepreneurial skills, adaptive skills to global changes and its strategic location that provides easy access to regional markets.
“In order for our country to reach its target of becoming one of the world’s largest economies, it is necessary to increase its one percent share from international direct investments on a global level,” she said. “In order for Turkey to attract targeted amount of investments in today’s tougher than ever global competition conditions, the right investment climate for existing investments must be created and protected. We also have to provide the suitable basis for attracting qualified investments that will make Turkey attractive in the future.”
Investment in developed countries decreases
In terms of regional investment flows, FDI inflows to developed countries fell by 27 percent to $557 billion, the lowest level since 2004. Investments in Europe remained at the $200 billion level, while investments in the United States was $252 billion, a 9 percent decrease. According to the report, the most important reasons for this decline was the return of investments to their home countries and a significant decrease in investments to the U.K. due to Brexit. With the decrease in investments in developed countries, the share of developing countries in global investment flow increased from 46 percent to 54 percent. Developing Asia and Africa recorded higher FDI inflows compared to 2017, while investments in Latin America and the Caribbean declined.
Outward FDI from West Asia reached a historic high of $49 billion in 2018, up from $39 billion in 2017, said the report. Saudi Arabia, the United Arab Emirates and Turkey were mainly responsible for the increase. “Turkish companies, which are increasingly investing in Africa, increased their outward FDI by 37 percent to $3.6 billion in 2018.”
Sixth in special economic zones
Focusing on special economic zones, this year’s report emphasized that Turkey looked for incentives in innovation activities such as research and software development with its Technology Development Zones model developed in the 2000s in order to attract more investments in R&D and high tech. Turkey ranked sixth among countries with the most special economic zones and fourth in developing Asia.
Turkey operates 18 active free zones and has one more under development. Located on coasts or within easy access to ports, the zones are designed to promote classic export-oriented manufacturing investment. In the 2000s, Turkey created a new type of SEZ – technology development zones – to attract investments in R&D and hightech industries. There are 83 TDZs, 20 of which are under construction. Incentives include exemption of corporate income tax on profits for software development, R&D and design activities; exemption from value added tax on the sale of software produced in TDZs; and exemption from income tax for employees engaging in R&D, design and support activities. Exemption from customs duties on imported goods and subsidies on social security premiums are also offered.