www.ekonomi.gov.tr 1

Competitiveness of

Turkey

&

Investment Climate

Indices/Rankings

Ministry of EconomyGeneral Directorate for Incentives Implementation and Foreign Investment

June 2017

www.ekonomi.gov.tr 2

Competitiveness of

Turkey

www.ekonomi.gov.tr 3

World Economic Forum

WEF defines competitiveness as “the set of institutions, policies and factors

that determine the level of productivity of a country”.

3

What does Competitiveness mean?

www.ekonomi.gov.tr 4

National CompetitivenessCouncil of Ireland

• The NCC defines competitiveness as ‘the

ability of firms to compete in markets.

Ireland’s national competitivenessrefers to

the ability of the enterprise base in Ireland

to compete in international markets.

• The NCC uses a a three level pyramid

framework model to understand and

analyse national competitivenessand its

drivers.

4

What does Competitiveness mean?

www.ekonomi.gov.tr 5

Geostrategic Location

– Proximity to Major Markets

General Economic Outlook of Turkey

– Robust Economic Growth

– Economic and Financial Stability

Market Size

– Quantity: Large and Growing Population

– Quality: Rising Purchasing Power

Human Capital

– Well Educated Labor Force

– Young and Dynamic Population with high technological adaptation ability

Turkey’s Full Integration into the Global Economy

– FTAs and EU Customs Union

Liberal Foreign Investment Regime

Business-Friendly Investment Environment

– Progressive Investment Climate Reforms

– Innovative and Pro-active Investment Incentive System

Main Pillars of Turkey’s Competitiveness

www.ekonomi.gov.tr 6

GDP: $18,9 trillionPopulation: 601

millionGDP: $2 trillionPopulation: 142

million

GDP: $423 billionPopulation: 78 million

GDP: $3,1 trillionPopulation: 729

million

4 Hours of Flight Distance to :

≈ 1:3 of the World GDP

≈ 1:4 of the World Population

≈ 1:2 of the World Trade Volume

Geostrategic position

www.ekonomi.gov.tr 7

Robust Economic Growth

Mean annual growth rate between 2002 and 2016 was 5.6%.

5,6

9,69,0

7,1

5,0

0,8

-4,7

8,5

11,1

4,8

8,5

5,2

3,5

7,2

5,9

7,4

4,55,3

-1,3

3,5

5

2003 2005 2007 2009 2011 2013 2015-I 2015-III 2016-I 2016-III 2017-I

Source: TURKSTAT

www.ekonomi.gov.tr 88

Large Economy

1.574.018

- 5.000.000 10.000.000 15.000.000 20.000.000 25.000.000

China

United States

India

Japan

Germany

Russian Federation

Brazil

Indonesia

France

United Kingdom

Italy

Mexico

Korea, Rep.

Saudi Arabia

Spain

Canada

Turkey

Iran, Islamic Rep.

Thailand

Australia

Gross Domestic Product 2015, PPP

Source: World Bank

Turkey ranks as the 17th

largest economy in the

World and 6th in Europe.

www.ekonomi.gov.tr 99

GDP based on Purchasing Power Parity, Trillion Dollar, 2015)

Source: IMF, World Economic Outlook, October 2016

Large Economy

www.ekonomi.gov.tr 10

Rising Purchasing Power

4 6985 961

7 304 7 906

9 65610 931

8 980

10 56011 205 11 588

12 480 12 11211 014

10087

8 80710 165

11 394

12 89713 895

15 02114 491

16 012

17 69218 437

19 156 19 61019 917

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GDP Per Capita GDP Per Capita (PPP)

Since 2002, GDP per capita has nearly tripled from 3,581 USD to 10,807

USD in 2016. In PPP terms GDP per capita exceeded 19,917 USD in 2015.

www.ekonomi.gov.tr 11

Sound Fiscal Performance

Central overnment budget deficit/GDP ratio in 2015 was 1.2% and Turkey

outperformed 19 EU Countries. In 2016, Central government budget

deficit/GDP ratio was 1.1%.

Debt/GDP ratio of Turkey was 32.9% in 2015 and Turkey outperformed 25

EU countries. In 2016, Debt/GDP ratio of Turkey was 28.3.

www.ekonomi.gov.tr 12

Dynamic and Growing Population

Growth Rate of

Population: 13,5 ‰

Million People

Source: TURKSAT

Demographic Profile* (2015)

(*) Projections

Source: UN

www.ekonomi.gov.tr 1313

23 781 24 516 25 12226 256

27 26128 713 29 565

30 658 30 855 31 131

Labor Force And Employement

Labor Force Employed

Human Capital

Source: TURKSAT

www.ekonomi.gov.tr 1414

Liberal Foreign Direct Investment Regime

Legislation

• Law No. 4875 (June 17, 2003)

Foreign Direct Investor

• Foreign real person

• Foreign legal entity established under the laws of foreign countries

Foreign Direct Investment

• Establishing a new company or branch of a foreign company

• Acquisitions of shares in a company established in Turkey

Main Principles

• National treatment

• No pre-entry screening/minimum capital requirements • Right to acquire real estate

• Guarantee to free transfer of proceeds, dividends and other financial assets

• Right to employ key expatriate staff

• Right to access international dispute settlement

www.ekonomi.gov.tr 15

International Legal Framework of FDI in Turkey

• Signed with 100 countries

• 76 treaties are in force

BilateralInvestment

Treaties

• 82 treaties are in force

Avoidance of Double Taxation

Treaties

• Signed with Singapore and S. Korea

• Negotiations are in progress with 5 countries

Free Trade Agreements

(Investment Chapter)

Liberal Foreign Direct Investment Regime

www.ekonomi.gov.tr 16

Investment Advisory

Council(IAC)

Taxes and

Incentives

COUNCIL OF MINISTERS

Coordination Council

for the Improvement of Investment Environment(YOIKK)

Steering Committee Working Groups for

Assesment and Evaluation

Monitoring

(YOIKK Secretariat)

Company registration

and Corporate

Governance

TECHNICAL COMMITTEES

EmploymentInput Supply Strategy

(GITES) and Sectoral

Licensing

Land for investment,

environmental and

zoning permits

InfrastructureIntellectual Property

Rights and R&DAccess to

Finance

Legislation of

Investment Climate

Foreign Trade and

Customs

Progressive Investment Climate ReformsEfficient Public Private Dialogue Platforms

www.ekonomi.gov.tr 17

Pro-active Government Policies for

Business-Friendly Investment Environment

Law on Data ProtectionNo. 6698 (April 7, 2016)

Law on Improvement of the Investment Environment No. 6728 (August9, 2016)

International WorkforceLaw No. 6735 (August 13, 2016)

Amendment of the Regulation on the Implementation of the Lawon Turkish Citizenship (January 12, 2017)

Law on Individual PensionSystem No. 6740 (August 25,2016)

Law on Establishment of Turkey Wealth Fund Administration No. 6741(August 26, 2016)

Law on Project Based Support System No: 6745 (September 7, 2016)

Revisions on Investment Incentives System (October 5, 2016)

Law on Movables as Collateral in Commercial Transactions No. 6750(October 28, 2016)

Law on Expert Witness System No. 6754 (November24, 2016)

Law on Industrial PropertyNo. 6769 (January 10, 2017)

Turquoise Card for

Foreigners: TurquoiseCard gives its holdersindefinite right to stay

and Word in Turkey andto reside with their

families.

Turkish Citizenship forForeign Investors:

Access to Turkishcitizenship has been

eased for foreigninvestors with theamendments made to

Turkey’s currentcitizenship law with the

amendment made onJanuary 12, 2017.

Investment Climate Reforms

www.ekonomi.gov.tr 18

Region & IndustryBasedProgram

Regional

Large Scale Investment

Priority Investment

Strategic Investment

General

Project BasedProgram

Projects with a minimum

investment threshold of USD 100 Million

Business AttractionCenters

Start-ups, Business

rehabilitation andInvestment relocation

Incentives for R&D and Design

R&D and design investment

projects with a minimum 15 or 30 R&D personnel employment.

Pro-active Government Policies for

Innovative and Efficient Investment Incentives

www.ekonomi.gov.tr 19

Source: Ministry of Economy, CBRT

Foreign Direct Investment Flows to Turkey

USD Billion

www.ekonomi.gov.tr 20

Foreign Direct Investment Flows to Turkey

Source: MoE

Measuring the Competitiveness by FDI Inflows

January-April

www.ekonomi.gov.tr 21

FDI Inflows by Home Country Groups

Measuring the Competitiveness by FDI Inflows

www.ekonomi.gov.tr 22

Number of Companies with Foreign Capital

Source: Ministry of Economy, CBRT

www.ekonomi.gov.tr 23

Investment Climate

Indices/Rankings

www.ekonomi.gov.tr 24

Benefits

• Comparison among economies

• Comprehensive measurementand evaluation

• Reflection of differentperspectives and data aboutan economy

• Encouraging economies forfurther reforms

Shortcomings

• Limited assumptions

• Deficiency of multidimensionalstructure about investmentenvironment

• Subjective evaluations basedon surveys and interviews

• Metodological problems: imposibility of comparisonamong economies on specificaspects

Benefits and Shortcomings

www.ekonomi.gov.tr 25

The Index of Economic Freedom, Heritage Foundation and The

Wall Street Journal

Annual Global CEO Survey, PriceWaterhouseCoopers

Doing Business, World Bank

FDI Confidence Index, A.T. Kearney Global Management

Consultants

Best Countries for Business, Forbes

Index of Economic Freedom, Fraser Institute

Corruption Perception Index, Transparency International

The World Competitiveness Yearbook, The International Institute

for Management Development

Global Competitiveness Report, World Economic Forum (WEF)

The KOF Index of Globalization, KOF Swiss Economic Institute

OECD’s FDI Restrictiveness Index, OECD

So many indices, why?

www.ekonomi.gov.tr 26

Limitations of Investment Indices

• Perceptions

• Perspectives of CEOsAnnual

Global CEO Survey

• Standardized case scenarios

• One/two major cities- data representation

World Bank’sDoing

Business

• Free movement of capitalOECD’s FDI Restrictiveness

Index

Focusing on limited aspects of investment environment

www.ekonomi.gov.tr 27

Dimension Attribute Key Performance Indicator (KPI)

Attractiveness

Openness

• FDI

• Foreign Trade

• Number of tourists

• Number of foreign students

• Number of migrants

Innovation

• Employment rate of high-tech

sectors

• Exports of high-tech goods

• Usage of internet

• Number of scientific publications

Efficiency

• Unemployment level

• Logistical performance

• Tax rate

• Rule of law

Resources

• Data related to GDP

• Natural resources

• Education level (college graduate)

Dynamism 3 year variation of KPIs

Sustainability

Resilience• Humanitarian development indicators

• Avg. Years of school attendence

Vulnerability

• Debt/GDP

• Inflation rate

• Number of suicide

• People affected by natural disease

The GAI involves 144

countries,

approximately 93% of

the population and 98%

of GDP worldwide

Rankings

1 USA

2 Germany

3 Japan

4 Canada

5 Singapore

14 Italy

45 Turkey

The Global Attractiveness Index

www.ekonomi.gov.tr 28

FURTHER INFORMATION

CONTACT

www. economy.gov.tr

Ministry of Economy

General Directorate for Incentive

Implementation and Foreign Investment

E-mail: incentives@economy.gov.tr

Tel: +90 312 204 84 48

Fax: +90 312 204 89 16