Recent Treasury figures show foreign companies operating in Turkey were able to transfer close to $27 billion to their countries of origin between January 2003 and July 2008, while investing a record amount of $65.4 billion in the same period as foreign direct investment (FDI) in addition to creating employment and enhancing the production capacity of the Turkish economy.
Analysts see the transfer home of profit by foreign companies as a positive sign for the economy. "It”s a win-win situation" said Nurettin Canikli, an economist and expert on finance.
Canikli, who is also a member of Parliament from the ruling Justice and Development Party (AK Party), explained to Today”s Zaman that the record amount of transfer of profits will draw more FDI to Turkey. “The fact that new foreign companies are entering the Turkish market will stimulate Turkish production capacity,” he said. “Nothing is wrong with profit making by foreign companies since it will ultimately benefit the Turkish economy,” Canikli added.
Despite a financial crisis in US markets and its aftershocks in other markets, foreign companies in Turkey are pleased with the investment climate, though the latest figures show a slowdown in the inflow of FDI. With new revisions to regulations that allow foreign companies to transfer earnings and profits to their home countries, international companies feel safe investing in Turkey, generating employment and bringing know-how to industry.
FDI in Turkey slowed down between January and July compared to the same period last year, recent Treasury data showed. The net FDI inflow was $762 million in July 2008, reaching $9.4 billion in the period between January and July -- a decline of 35.5 percent from the same period last year, when it was $14.5 billion. Turkey was able to attract a record $21.9 billion of FDI in 2007.
The report released yesterday by the Treasury shows there is still robust foreign interest in the Turkish economy. Accordingly, 261 companies with international capital have been established and 50 instances of foreign capital participation with existing domestic companies occurred in July. Of $9.4 billion total FDI, the equity investment inflow component reached $7.6 billion in the January to July period, with $3.2 billion in the financial intermediaries sector.
Canikli welcomes the numbers and quips, “The more the merrier.” Stressing that foreign investors will first manufacture and create employment opportunities, Canikli said, “It is very natural for them to take some of the profit to their home countries,” adding, “If they think they will not reach projected profitability, foreign investors will shy away from the Turkish economy.” Canikli considers the inflow and outflow of capital to be a healthy sign for the investor-friendly Turkish economy. “In all developed countries, conditions are the same, and Turkey caught the train and improved its investment climate,” he said. “Turkey proved itself to be a reliable market for fund managers who have been hurt by financial turmoil in the US and European markets,” Canikli noted.
Professor Mithat Melen, a deputy from the opposition Nationalist Movement Party (MHP), agrees with Canikli. Speaking to Today”s Zaman he stated that foreign companies created “added value” for the Turkish economy, including but not limited to employment, production, tax revenue and social security premiums. He said he most valued the employment and exports that FDI has created in Turkey. “If foreign companies transferred $27 billion in profit back home, it means they enjoyed great sales in Turkey and benefited the Turkish economy by around $100 billion,” he said.
Melen noted that stability played an important role in attracting FDI to Turkey. “Against the backdrop of financial crisis in the world, Turkey can serve as a model of a safe haven for investment.” He explained that Turkey needs to continue with its reform process to counter external shocks.
International Investors Association of Turkey (YASED) board chairman Tahir Uysal warned yesterday that FDI would slow in 2009 as a result of negative developments in international markets and ongoing political uncertainty. Noting that Turkey is in a good position vis-à-vis fiscal and monetary policies, Uysal said, “Next year we will see the results of concerns by foreign companies on the stability of the Turkish political system.” He also said the financial crisis in the US had resulted in recession in European economies. “This might impact the Turkish economy badly as the EU is a significant trading partner for Turkey,” Uysal said. “Despite all these negative reports, FDI to Turkey has progressed well, although it will fall short of the $20 billion target for 2009.”
