That has numerous reasons, one of which is Turkey’s failure to promote FDI, i.e., market itself. Now Turkey is beginning to rectify that shortcoming in attracting greenfield FDI especially with the help of the newly established Turkish Investment Support and Promotion Agency (TISPA). The enactment of Law 4875 in June 2003 to replace the obsolete Law 6224, dating to 1954 governing FDI, was a crucial step forward in Turkey’s active approach in attracting FDI under the AK Party government. The recent creation of TISPA, under Law 5523 enacted last July, is another crucial step forward in Turkey’s long-delayed emergence as a top FDI host country.Almost all countries have FDI promotion agencies (IPAs). According to the World Association of Investment Promotion Agencies (WAIPA), there are 191 IPAs in 149 countries that are WAIPA members, some of which have both national and regional IPAs. How effective have IPAs been in attracting FDI? Recent research shows that they do have a positive effect on FDI inflows. There are some important points to note about their role. First, an IPA is useless if the investment climate is bad. Second, an IPA is more effective the more it focuses its efforts on policy advocacy in improving the investment climate for all investors, both national and foreign, instead of targeting individual FDI projects from specific countries in specific sectors. Third, its effectiveness is maximized when it is institutionally linked directly to the highest executive branch of the government, such as the prime minister’s office. Fourth, IPAs tend to be more effective if they have direct private sector participation. Establishing an IPA in Turkey has been a controversial, drawn-out process lasting more than five years, due primarily to the resistance of the Turkish bureaucracy, especially the Treasury Under-Secretariat, in allowing the private sector to a play a significant role and give it the staffing flexibility it needs in terms of hiring experts from outside the bureaucracy and paying them competitive salaries.
Law 5523 for the creation of TISPA describes its organizational structure and objectives. The prime minister has the authority for TISPA’s establishment and operation as part of the Prime Ministry with administrative and financial autonomy. TISPA will be able to seek financial resources from outside the government by charging user fees and receiving grants. Based on international experience, however, I doubt that TISPA will be able to get much financing outside the government. I also regard the law’s capping of TISPA’s professional staff at 30 and of the percentage of support personnel at 20 percent of total employees, along with other staffing restrictions, as micromanagement which could restrict TISPA’s operational effectiveness. These staffing issues should have been left to TISPA’s advisory council, which should be able to resist TISPA’s bureaucratic proclivity to expand its size.
TISPA’s objective is to support and promote both national and foreign investments. As such, it has a broader scope than many IPAs in other countries that are exclusively concerned with foreign investments. I believe that it was the right decision to assign TISPA this broader scope as it will avoid either the impression or the reality of favoring foreign over national investments. On the other hand, dealing with foreign investments, which can provide unique economic benefits beyond those provided by national investments, requires special expertise which TISPA might have difficulty developing if its limited resources are divided between supporting and promoting both national and foreign investments. TISPA’s advisory council, appointed and headed by the prime minister, will have both public and private sector representatives enabling TISPA to benefit from private sector expertise directly. TISPA’s head, chosen by Prime Minister Erdoğan, is 36-year-old polyglot Alparslan Korkmaz from outside the Turkish bureaucracy, who evidently has the international experience required for the job. I wish TISPA success in its important mission.
