Published On: Sun, Feb 18th, 2018

The importance of Foreign Direct Investments for Turkey

The concept of Foreign Direct Investment has rather developed towards the services sector, in our world today. When we look at the foreign investments realized in Turkey today, we rather see privatizations, corporate mergers and acquisitions of real estate which really supports the above observation.

Regarding Turkey’s investments abroad on the other hand, the importance of the industry sector is still valid and in fact it is as important as the investments made in the service sector. In any case, the importance of Foreign Direct Investment (FDI) continues to increase each and every year for developing countries to include Turkey.

As for the reason why it is so vital we can name several major points as follows: The most important reason for this is the advantages that FDI provides for the host country. Additional foreign resources (finance) provided by FDI has the highest impact. This resource could be the capital the investing party brings to the country or else the profits they leave in the country for further investment. This is exactly the reason why both developed countries and developing ones make great efforts to attract FDIs.

Nevertheless, FDIs could have some negative impact on the host country’s economy as well, such as monopoly situations created by the investing companies causing unfair competition conditions to damage local establishments lacking the capacity and ability to survive tough competition.

On the other hand, one point is very important for foreign investors to be motivated for such ventures and in fact it is more important than high profitability: The host country must be able to offer an environment of political and economic stability. Unluckily, despite all the economic charm it possesses, Turkey has been considered among countries to have fallen short of this performance by some.

Nevertheless Turkey has been trying its best to draw FDIs by introducing many tools such as liberalization of markets, investment discount, free land allocations, tax reduction and similar incentives.

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