The University of Economics in Katowice/Poland

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The University of Economics in Katowice/Poland

• FOREIGN DIRECT INVESTMENTSin Turkey
• FDI

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The University of Economicsin Katowice/Poland

• Part Two
• FDI The Case of Turkey
• Intensive Programe Seminar of teachers and
  students
• 1st-13th May 2006 HONIM / Brussels

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The University of Economicsin Katowice/Poland

• Authors
• Anna Brzeska
• Anna Gandor
• Edyta Tyc
• Artur Barski
• Slawomir Czech
• Session led by PhD Joanna Czech-Rogosz

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24th of January 1980

• Opening to foreign markets
• Export-led growth
• Reducing the public sector
• Privatization and liberalization
• Development of banking and financial institutions

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24th of January 1980

• No currency restrictions
• Free low of capital
• Establishment of capital market and
  reorganization of Istanbul Stock Exchange

• Encouraging investments

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EU enlargement
2005 2015?
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Accession features

• Advanced integration
• Demographic dynamism

• Duality of economy
• Migration threat

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Economic freedom
Lassez faire!!!
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GDP ratio
Very unstable growth
Only 30 of EU average
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Low employment
Turkey 46

• EU15 65
• EU25 63
• Poland 52

(Employed / work force population ratio)
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Inflation
High inflation numbers in the late 90s Over 80
in 1998
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Turkey FDI
Performance
HIGH LOW
HIGH Ireland, Poland, Hungary Greece, Egypt
LOW Turkey
Potential
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Historical data
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FDI ratios

• FDI/GNP
• Developing countries 28
• African countries 21

• FDI per capita
• Developed countries 2245
• World average 528

Turkey 92
Turkey 5
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FDI breakdown
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58
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Foreign companies
70 EU
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Investor is making decision
Safety of investment?
Where to invest?
What do they offer?
Possibility of high profits?
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Competitive locations
Greece
East Europe
Russia
North Africa
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What to invest in?

• Mobile telecommunications
• E-business
• Banking
• Internet

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What to invest in?

• Automotive
• Electronics

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Turkish gain on investments

• Improved competitiveness
• Research Development boost
• Employment

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TURKISH FDI DETERMINANTS
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GENERAL

• Huge domestic market (70 mln people)
• Location at the crossroads between East and West
• High labor force potential

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STABILITY

• Low political stability
• Accomplishment of structural reforms
• Improved resilience to shocks, reduced
  vulnerability
• EU membership expected

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GROWTH

• High potential output
• Structural reforms implemented
• Privatization lags
• Unstable historical growth

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LEGAL SYSTEM

• Business legislation not sufficient enough
• Poor implementation of laws
• Incompetent
• bureaucracy

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LEGAL SYSTEM

• ctnd.
• Frequent changes in legislation
• Lack of political culture
• Corruption and bribery
• Unnecessary
• sectoral licenses

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TAXES

• Increasing tax burden
• Lack of viable tax system
• Vast unregistered economy

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INCENTIVES

• Country promotion inadequate
• Generous incentives for investors
• No discrimination between foreign and domestic
  investors

I need information about Turkey!!!
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LABOR

• Good competitiveness
• High skilled
• Increasing labor costs
• Large and low efficient agricultural sector

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INTELLECTUAL PROPERTY RIGHTS

• Crucial importance for development
• IPR protection in place, but ineffective
• EU standards missing

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LAND

• Shortage of appropriate land for investments
• No space planning
• Rehabilitation of Organized Industrial Zones
  needed

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INFRASTRUCTURE

• Poor transportation
• infrastructure
• Basic infrastructure insufficient
• Low RD support
• Monopolization of essential branches

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Late improvements

• FDI law enacted
• Company establishment simplified

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The Foreign Direct Investment Law of 2003

• Freedom to invest
• Freedom of profit transfers
• Acquisition of real estates
• International arbitration allowed
• Employment of foreign staff

Its getting better!!
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Major FDI obstacles

• Poor legislation
• Over-regulation
• Bureaucracy
• Slow pace of reforms
• Political resistance

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Investors institutional fears

• Political interference
• Weak justice system
• Corruption
• Poor implementation of IPR

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Investors economic fears

• Lack of economic stability
• Chronic inflation
• Exchange rate instability

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Selected bibliography to the 2nd Part

• Gros D., (2005) Economic aspects of Turkeys
  Quest for EU membership, CEPS Policy Brief no.
  69/2005.
• Investment Environment and Foreign Direct
  Investments in Turkey, (2004) Working Paper for
  Investors Advisory Council Meeting in March 2004,
  Turkish Industrialists and Businessmens
  Association, Istanbul.
• Loewendahl H. and Ertugal-Loewendahl E., (2001)
  Turkeys Performance in Attracting Foreign Direct
  Investment, Implications of EU Enlargement,
  European Network of Economic Policy Research
  Institutes Working Paper no. 8.

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Thank you for your attention!!

• Have a nice day!