INSIGHTS
Reasons to Invest in Türkiye
ODS Consulting Group
06.09.2022
Located in one of the most strategic geographic locations, the Republic of Turkey forms a bridge between the East and the West; from Europe to the Middle-East, and the Black Sea to the Mediterranean. A parliamentary democracy, Turkey is an economic, cultural, and military powerhouse with longstanding presence in international organizations such as the founding member to United Nations, Organization of Islamic Cooperation, Organization for Economic Cooperation and Development, Organization for Security and Co-Operation in Europe, a member state of the Council of Europe since 1949 and NATO since 1952. Thus, in this short article, we explore why Turkey, a geographical and a cultural bridge between two worlds, is still an attractive destination for investment opportunities in our post Covid-19 world. We aim to briefly discuss the countries’ economic, geographic, demographic, legislative situation and trade relationships to form a holistic opinion on the matter.
Turkey has a unique and, in some regard, beneficial demographics for investment purposes as its demographics differ itself from the developed major markets within proximity. With a median age of 30.9, the Turkish population is very young, making it the youngest country in comparison to European nations. The countries’ overall workforce of 33.3 million people makes it the 3rd largest labor force in Europe with a growth rate of 20% in the past decade (invest.gov.tr). Due to the consistent expansion of its population, Turkey has been putting tremendous effort to increase the qualification of its young population and now has the capacity to produce 900,000 university graduates every year, while 8 million students are currently enrolled for tertiary education (Invest.gov.tr). The number of Turkish Universities have risen from 76 in 2002 with 248,310 University graduates annually, to 207 Universities in 2021 with 1,112,747 University graduates on an annual basis (Invest.gov.tr). The country is raising talents faster than ever, and with the value drop in the Lira, the country becomes a very attractive haven for investment opportunities. With an increased capacity for education and a young population, we expect Turkey to continue to differentiate itself and maintain its demographic balance as the country has seen consistent growth without any fall or breakage since the 19th century. Today, with a population of 85 million people, Turkey continued to grow at a rate of 1.09% in 2020.
Turkey has maintained a track record of growth, despite the effects of a global crisis.
According to IMF, the upper middle-income economy has had an impressive growth in PPP terms as it has rapidly progressed from the 18th place in 2003 to 11th in 2020 among the Group of Twenty countries (Invest.gov, 2022). Yet, one cannot deny the adverse effects the pandemic has unleashed on the world economy. As a result, global output has experienced a shrinkage, however few economies have reported growth and Turkey was one of these nations reporting growth by 1.8% in 2020 driven by cheap borrowing policies of state banks (Reuters, 2020). Despite the following higher inflation rates and a fluctuating local currency exacerbated by Covid-19, Turkey has managed to become the second-fastest growing economy by 7.4% in the third quarter of 2021 among other OECD countries (Daily Sabah, 2021).
As a sustainable growth formula, the country seems to be adopting and taking advantage of the evolving global value chain to favorably position itself as a production hub within close proximity to major markets. Turkey has already made better progress as it reached an all-time high export number of $225.4 billion USD in 2021 (DailySabah). We should expect this trend to continue in the future due to the devaluation in the local currency coupled with the countries’ advantageous geographic location and political will, which comes in the form of government funded support programs for investors & exporting companies to accelerate the reorganization of the economy to adapt to the evolving value chain in our post Covid-19 environment.
The country has been investing heavily to improve its logistics capability to ensure sustainable trade growth. Stretching across Southeastern Europe and Southwestern Asia, Turkey has been a critical hub for trans-continental trade throughout history. Surrounded by sea in the North, West and her Southwestern border, Turkey has coastlines on the Black, Aegean, and Mediterranean Seas. The country shares land boundaries with Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Iran, Iraq, and Syria (Intracen 2017). In order to take full advantage of this historic trade route which Turkey has been a part of throughout history, country has made vast investments to improve the safety and volume of its road network, expanded and renewed its rail network while spending serious effort to integrate it with global trade routes that connect Turkey to Europe, Russia and China. Lastly, Turkey has been increasing the capacity of its Mersin International Port (MIP), which is the largest port in Turkey and part of a network of ports connected to state-owned railroads located all across Turkeys coasts in Black, Aegean, and Mediterranean Seas. We are able to observe the impact of these investments as the country is listed 33rd among 190 countries in The World Bank’s Ease of Doing Business Index score, which the result is driven from 10 subindices and some of them include starting a business, getting credit, protecting investors, trading across borders, enforcing contracts and resolving insolvency.
Turkey has strong trade relationships which is of key importance for it to become a trade hub. A key actor in commercial diplomacy, the country is a party to the General Agreement on Tariffs and Trade (GATT) and a founding member of the World Trade Organization. Turkey conducts free trade agreements in line with GATT and the Turkey-EU Customs Union, which allows Turkey and the European Union to trade goods without any restrictions; this also constitutes major legal basis of Turkey’s free trade agreements concerning both the autonomous regimes and preferential agreements with third parties (Ministry of Foreign Trade, 2022). As a result, Turkey negotiates and concludes Free Trade Agreements (FTAs) with third parties in parallel with those of the EU. So far, Turkey has 22 FTAs in force namely with, EFTA, Israel, Macedonia, Bosnia-Herzegovina, Palestine, Tunisia, Morocco, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Mauritius, South Korea, Malaysia, Moldova, Faroe Islands, Singapore, Kosovo, Venezuela and United Kingdom (Ministry of Foreign Trade, 2022). Turkey has been conducting negotiations to extend the scope of its existing FTAs with an aim to update and deepen their scope while negotiating FTAs with 17 countries and blocs to form new agreements.
Turkey has organic industrial compatibility to the standard regulations of major developed markets within proximity. Turkish Standards Institute (TSE), the sole body authorized for standardization in Turkey, provides services that enable the production of goods and services in accordance with rules, laws, codes and standards applicable in global markets (TSE, 2022). Because of Turkey’s customs union agreement with the EU and existing efforts to conform to EU regulations, TSE enables organizations to obtain the ‘CE Mark’ to gain access into the European markets. Similarly, the ‘G mark’ provided by TSE enables goods and services to meet the requirements in accordance with GSO regulations in Gulf countries.
The government of Turkey places great value to foreign investment and provides lucrative incentives. These projects get supported through series of instruments which help ease the cost burden and the realization of return for investors. In general, the support programs are linked to R&D and innovation projects, employee training initiatives, and for exporters it takes the shape of grants and incentives. These programs are applicable to both global and local companies operating across all sectors in Turkey. Some of the notable global companies taking advantage of these programs include Ford, Hyundai, Fiat, Mercedes in the automotive sector, as well as other globally leading companies in their sectors such as Nestle, Novartis, BASF, P&G, SIEMENS, Unilever and Sumitomo Corporation (Invest.gov.tr). Moreover, Turk Eximbank, a fully state-owned bank serving as an instrument for major export incentives, has provided a total support fund of USD $45,6 billion of which USD $28,4 billion was credit support and the remainder USD $17.1 billion was utilized as insurance support (Eximbank, 2020). This was a 4% increase in allocated funds in comparison to 2019, which brought the banks export contribution for the 2020 year to 26.9%.
Turkish Demograhpic Data
https://worldpopulationreview.com/countries/turkey-population
Turkish Youth
Invest.gov
EBRD
https://www.ebrd.com/news/2022/record-ebrd-investment-in-turkey-to-support-recovering-economy-.html
Patika
https://www.patika.dev/insights/turkey-the-rising-tech-talent-hub
Intracen
Ministry of Trade
https://www.trade.gov.tr/free-trade-agreements
https://www.reuters.com/article/us-turkey-economy-gdp-idUSKCN2AT1UE
https://en.tse.org.tr/Hakkimizda
Glossary
‘PPP’ is used to calculate the purchasing power of currencies based on a ‘basket of goods’
The government of Turkey places great value to foreign investment and provides lucrative incentives.
