Turkey's Investment Climate: A Foreign Direct Investment Analysis

This report provides a comprehensive analysis of Turkey's potential for foreign direct investment (FDI). It examines external environmental factors, including political, economic, social, and technological influences, as well as Turkey's national resources, foreign currency exchange dynamics, and existing trade policies and barriers. The report also assesses the current level of FDI in Turkey and offers recommendations to enhance the country's attractiveness to foreign investors. Key findings highlight both opportunities, such as Turkey's strategic location and growing economy, and challenges, including political instability and educational shortcomings. The analysis concludes with actionable steps aimed at improving Turkey's investment climate and attracting increased foreign capital.

Running head: MANAGING ACROSS BORDERS
Managing across borders
Name of the student
Name of the university
Author note

1MANAGING ACROSS BORDERS
Executive summary
The aim of this report is to discuss about the potentiality of Turkey in relation to the foreign
investments. This report discussed about the external environmental factors of Turkey that will
be faced by the investing business organizations. In addition, the existing trend of the foreign
direct investments in Turkey is also being discussed in this report. The existing trade barriers and
policies of Turkey are also being critically analyzed in this report. In accordance to the identified
issues and shortcomings, this report discussed a few recommended steps that will help Turkey to
be a more attractive country in terms of attracting foreign direct investments.

2MANAGING ACROSS BORDERS
Table of Contents
Introduction......................................................................................................................................3
Country overview............................................................................................................................4
External environmental factors in Turkey.......................................................................................4
Political factors............................................................................................................................4
Economic factors.........................................................................................................................7
Social factors...............................................................................................................................8
Technological factors...................................................................................................................9
National resources of Turkey.........................................................................................................11
Foreign currency and exchange.....................................................................................................13
Trade policies and barriers in Turkey............................................................................................14
Existing level of foreign direct investment....................................................................................15
Recommendations..........................................................................................................................16
Conclusion.....................................................................................................................................17
Reference.......................................................................................................................................18

3MANAGING ACROSS BORDERS
Introduction
The current business scenario poses diverse opportunities as well as challenges for the
business organizations. The major opportunity for them is the increase in the market size while
the major challenge is the increase in the number of competitors. In accordance to tap these
opportunities and overcome the challenges, various initiatives are being inherited by the
contemporary business organizations. One of those strategies is the foreign investments. In the
recent time, rate of foreign investments is rapidly increasing worldwide (Salacuse 2017). This is
mainly due to the reason that initiation of foreign direct investments is having benefits for both
the investing organizations and the host country.
Foreign investments help the business organizations to enter in the new countries and tap
the new market there. Thus, their limited market opportunities in the home country get increased.
On the other hand, host countries attracting foreign investments are having the advantages of
economy growth, increase in foreign reserves and employment opportunities (Gholipour, Al-
mulali and Mohammed 2014). However, for the business organizations, there are various factors
that should be considered by the business organizations before investing in foreign countries.
Some of these factors are the external business environment in the target country, resources
available, current investment trend and trade policies and barriers.
In the current time, more countries are initiating different policies and practices in order
to attract more foreign investments. Among these countries, Turkey is one of leading countries,
which is offering extensive business opportunities for the investors. Moreover, the strategic
location of Turkey is also helping them in having foreign investments. This report will discuss
about the external business organizations prevailing in Turkey in the current time. In addition,

4MANAGING ACROSS BORDERS
natural resources that are available in Turkey will also be discussed. This report will discuss
about the existing trend of foreign investments along with the trade policies and barriers in the
country. In accordance to these, recommended steps will be discussed for Turkey to enhance
their inflow of foreign investments.
Country overview
Turkey situated in the Eurasian region bordered with Syria, Armenia and Georgia on the
Eastern side, Black sea on the northern side, Bulgaria on the western side and Mediterranean Sea
on the southern side. Turkey is strategically located with European region on one side and Asian
countries on other. Thus, they are having effective connectivity with both the regions. Turkey is
having parliamentary republic type of government along with having general assembly. Turkey
is having rich cultural heritage way to the early 13th century. In the present time, the strategic
relationship of them with other major economies and international bodies also helps them to have
favorable image in the global market. Currently, Turkey is ranked as 17th country in the world in
terms of nominal gross domestic product. According to the reports, Turkey is the 28th ranked
country in terms of exporting and 21st in terms of importing goods (Onis and Kutlay 2013).
These factors along with favorable political environment in the country are helping Turkey to
have positive image in gaining more foreign investments in the country (Kus 2014).
External environmental factors in Turkey
Political factors
As stated earlier, Turkey is having democratic republic type of political system in place.
Thus, diversity is maintained in the political scenario of the country. In addition, the recent move
of the government on liberalization is also creating favorable political environment for the

5MANAGING ACROSS BORDERS
business organizations. Turkey is the member of European Union and in accordance to the policy
of European Union, Turkey also follows liberal trade rules and regulations. Therefore,
organizations investing in Turley will have the advantage of having liberal business environment
and it will ensure that they can freely import and export their business processes and practices.
Moreover, according to the reports, the initiation of the custom union agreement further helped
to enhance the free flow of global trade in the country.
Figure: 1
Problematic areas in doing business in Turkey
Source: (Www3.weforum.org 2018)
However, in terms of the political environment in the county, there are few challenges
also that are to be faced in doing business in Turkey. According to the World Economic Forum,
one of the major challenges in doing business in Turkey is instability in implementing policy.

6MANAGING ACROSS BORDERS
Thus, it proves the ineffectiveness of the governmental system in Turkey. Moreover, another
major political risk to be faced by the investing organization is the increased risk of terrorism.
Figure: 2
Terrorism index of Turkey
Source: (Tradingeconomics.com 2018)
According to the above report, rate of terrorism is increasing at a rapid pace and it is
growing by years. Thus, the investing organizations will face the threat of terrorism in doing
business in Turkey.

7MANAGING ACROSS BORDERS
Economic factors
Figure: 3
GDP growth trend of Turkey
Source: (Tradingeconomics.com 2018)
Currently, Turkey is having economy growth rate of 1.8 percent. As per the reports,
Turkey is facing low growth rate in the recent time compared to their highest growth rate of 5.60
percent in 2002. However, the positive factor is that, growth rate of Turkey will stay positive in
the coming years till 2020. Thus, the business organizations will have positive economical
factors in operating in Turkey. However, according to the above figure, the current growth rate
of Turkey is better what they had in late 2017. Thus, it showing positive trend in the current
time. In addition, one of the major benefits that will be gained by the investing organizations in
Turkey is the favorable government budget balance. According to the reports of World
Economic Forum, Turkey is ranked at 54 in terms of government budget balance. Thus, the

8MANAGING ACROSS BORDERS
budget deficit is less and it will have positive impact on the operating business organizations
there by having favorable business infrastructure.
In addition, the major economic alliances of Turkey with regulatory authorities such as
International Monetary Fund also help them to ease the access to finances. Moreover, with the
increase in the foreign investments, Turkey is also witnessing economy growth in the recent
time. According to the reports of World Economic Forum, Turkey is ranked at 68 in terms of
country credit rating. This can be concluded that the business organizations investing in Turkey
will face fewer risks in relation to their risk of investments.
Social factors
Turkey is having favorable social environment in the country. This is mainly due to the
reason that young population constitutes the major portion of the total population of Turkey.
Figure: 4

9MANAGING ACROSS BORDERS
Population demography of Turkey
Source: (Indexmundi.com 2018)
According to the above figure, Turkey is majorly having younger population. It will be a
huge opportunity for the business organizations operating in this country. This is due to the
reason that the younger will be the younger population, the more will be the available human
resources for the business organizations along with having more market demand for the newer
offerings. In terms of market size, Turkey stands at 13 that denote positive market opportunities
for the business organizations. Moreover, due to the geographical presence of Turkey in the
Eurasian region, the socio-cultural scenario of Turkey is highly and heavily influenced by both
western and eastern cultures. Thus, the business organizations operating in Turkey will have
truly globalized social structure in place.
Moreover, with the increase in population and per capita income in the country, the
market demand in Turkey is also witnessing growth. This will also pose opportunities for the
business organizations. However, one of the major social challenges that will be faced by the
investors in Turkey is the quality of the education and training in the country. As per the reports,
Turkey is having the ranking of 101 in terms of education system, which is quite lower compare
to global standards. Thus, the investors in Turkey will have the issue of selecting eligible human
resources.
Technological factors
Turkey is witnessing huge growth in technological development. This is mainly due to
the increase in foreign investments in different sectors in the country. Communication

10MANAGING ACROSS BORDERS
technologies are the major portion of technological advancements in the country. It is reported
that information and communication marker Turkey is estimated at US$ 32.4 billion.
Figure: 5
ICT market of Turkey
Source: (Invest.gov.tr 2018)
Thus, it can be concluded that the investing business organizations will have the
advantages of having favorable technological environment and infrastructure in the country.
According to the report by Global Competitive Index, Turkey is ranked at 57 in terms of
availability of latest technologies. The ranking is relatively favorable for the business
organizations. However, in terms of the technological environment also, there will be fewer
challenges for the business organizations. One of the major challenges will be the lower amount

11MANAGING ACROSS BORDERS
of investment in research and development compared to some other major countries. Thus, it
may have negative impact for the business organizations in the long run.
National resources of Turkey
Prior to investing in Turkey, it is important to determine the availability of the resources
that will help in gaining competitive advantages. One of the major sources of gaining
competitive advantages in Turkey is their geographic locations. This is due to the reason that
Turkey is the gateway for the Asian businesses in entering the European countries and it acts
same for western organizations to enter the eastern regions. Thus, the investing organizations in
Turkey will have the opportunity to tap both the regions simultaneously. Another source of
competitive advantages in doing business in Turkey is mineral reserves. One of the major
minerals available in the country is gold. It is estimated that Turkey is having more than 23
million ounces. Thus, this will help in enhancing the national economy and increase the market
potentiality (Atilgan and Azapagic 2015).
Another major resource for the businesses operating in Turkey is the lower cost of human
resources. According to the reports, Turkey is having fourth largest labor force among the
countries in the European regions. The availability of the human resources will be more in
Turkey compared to some other countries. This also reflects on the lower cost of labor in the
country.