the u niversity of economics in katowice/poland
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The U niversity of Economics in Katowice/Poland. F OREIGN D IRECT I NVESTMENTS in Turkey FDI. The U niversity of Economics in Katowice/Poland. Part Two FDI – The Case of Turkey Intensive Programe Seminar of teachers and students 1st-13th May 2006 HONIM / Brussels. - PowerPoint PPT PresentationTRANSCRIPT
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The University of Economics in Katowice/Poland
FOREIGN DIRECT INVESTMENTS
in 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 students1st-13th May 2006 HONIM / Brussels
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The University of Economicsin Katowice/Poland
Authors: Anna Brzęska Anna Gandor
Edyta Tyc Artur Barski
Sławomir 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 investmentsEncouraging investments
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EU enlargement
20052005 2015? 2015?
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Accession features
•Advanced integrationAdvanced integration•Demographic dynamismDemographic dynamism
•Duality of economyDuality of economy•Migration threatMigration threat
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Economic freedom
Lassez Lassez faire!!!faire!!!
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GDP ratio
Only 30% Only 30% of EU of EU
averageaverage
Very Very unstable unstable growthgrowth
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Low employment
EU15 65%EU15 65%
EU25 63%EU25 63%
Poland 52%Poland 52%
((Employed / work force population ratio)Employed / work force population ratio)
Turkey 46%
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Inflation
HighHigh inflation inflation numbers in numbers in the late 90sthe late 90sOver 80% in Over 80% in 19981998
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Turkey & FDI
HIGHHIGH LOWLOW
HIGHHIGHIreland, Ireland, Poland, Poland, HungaryHungary
Greece, Greece, EgyptEgypt
LOWLOW TurkeyTurkey
PerformancePerformance
PotentialPotential
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Historical data
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FDI ratiosFDI/GNPFDI/GNP
Developing Developing countries 28%countries 28%
African countries African countries 21%21%
FDI per capitaFDI per capitaDeveloped Developed
countries 2245$countries 2245$
World average 528$World average 528$
Turkey 5%Turkey 5% Turkey 92$Turkey 92$
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FDI breakdown
40%40%58%58%
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Foreign companies
70% EU70% EU
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Investor is making decision
Safety of Safety of investmeinvestme
nt?nt?
Where Where to to
invest?invest?
What do What do they they
offer?offer?
PossibilitPossibility of high y of high profits?profits?
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Competitive locations
North AfricaNorth Africa
GreeceGreece
RussiaRussia
East East EuropeEurope
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What to invest in?
• Mobile telecommunicationsMobile telecommunications• E-businessE-business• BankingBanking• InternetInternet
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What to invest in?
• AutomotiveAutomotive• ElectronicsElectronics
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Turkish gain on investments
• Improved competitivenessImproved competitiveness• Research & Development boostResearch & Development boost• EmploymentEmployment
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TURKISH FDI DETERMINANTS
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GENERAL• Huge domestic market (70 mln Huge domestic market (70 mln
people)people)• Location at the crossroads Location at the crossroads
between East and Westbetween East and West• High labor force potentialHigh labor force potential
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STABILITY
• Low political stabilityLow political stability• Accomplishment of structural Accomplishment of structural
reformsreforms• Improved resilience to shocks, Improved resilience to shocks,
reduced vulnerabilityreduced vulnerability• EU membership expectedEU membership expected
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GROWTH
• High potential outputHigh potential output• Structural reforms Structural reforms
implementedimplemented• PPrivatizationrivatization lags lags• Unstable historical growthUnstable historical growth
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LEGAL SYSTEM
• Business legislation not Business legislation not sufficient enoughsufficient enough
• Poor implementation of lawsPoor implementation of laws• Incompetent Incompetent
bureaucracybureaucracy
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LEGAL SYSTEM
ctnd.ctnd.
• Frequent changes in legislationFrequent changes in legislation• Lack of political cultureLack of political culture• Corruption and briberyCorruption and bribery• Unnecessary Unnecessary
sectoral licensessectoral licenses
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TAXES
• Increasing tax burdenIncreasing tax burden• Lack of viable tax systemLack of viable tax system• Vast unregistered economyVast unregistered economy
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INCENTIVES
• Country promotion inadequateCountry promotion inadequate• Generous incentives for Generous incentives for
investorsinvestors• No discrimination between No discrimination between
foreign and domestic investorsforeign and domestic investorsI need I need
information information about about
Turkey!!!Turkey!!!
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LABOR
• Good competitivenessGood competitiveness• High skilledHigh skilled• Increasing labor costsIncreasing labor costs• Large and low efficient Large and low efficient
agricultural sectoragricultural sector
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INTELLECTUAL PROPERTY RIGHTS
• Crucial importance for Crucial importance for developmentdevelopment
• IPR protection in place,IPR protection in place, but but ineffectiveineffective
• EU standards missingEU standards missing
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LAND
• Shortage of appropriate land Shortage of appropriate land for investmentsfor investments
• No space planningNo space planning• Rehabilitation of Rehabilitation of
Organized Industrial Organized Industrial Zones neededZones needed
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INFRASTRUCTURE
• Poor transportation Poor transportation
infrastructureinfrastructure• Basic infrastructure insufficientBasic infrastructure insufficient• LowLow R&D support R&D support• Monopolization of essential Monopolization of essential
branchesbranches
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Late improvements
FDI law enactedFDI law enacted
Company establishment Company establishment simplifiedsimplified
19 319 3
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The Foreign Direct Investment Law of
2003
• Freedom to investFreedom to invest• Freedom of profit transfersFreedom of profit transfers• Acquisition of real estatesAcquisition of real estates• International arbitration International arbitration
allowedallowed• Employment of foreign staffEmployment of foreign staff
It’s getting It’s getting better!!better!!
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Major FDI obstacles
• Poor legislationPoor legislation• Over-regulationOver-regulation• BureaucracyBureaucracy• Slow pace of reformsSlow pace of reforms• Political resistancePolitical resistance
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Investors’ institutional fears
• Political interferencePolitical interference• Weak justice systemWeak justice system• CorruptionCorruption• Poor implementation of IPRPoor implementation of IPR
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Investors’ economic fears
• Lack of economic stabilityLack of economic stability• Chronic inflationChronic inflation• Exchange rate instabilityExchange rate instability
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Selected bibliography to the 2nd Part
1. Gros D., (2005) Economic aspects of Turkey’s Quest for EU membership, CEPS Policy Brief no. 69/2005.
2. Investment Environment and Foreign Direct Investments in Turkey, (2004) Working Paper for Investors Advisory Council Meeting in March 2004, Turkish Industrialists’ and Businessmen’s Association, Istanbul.
3. Loewendahl H. and Ertugal-Loewendahl E., (2001) Turkey’s 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!