Although attention has focused on Turkey’s recent brief IFDI surge, Turkish OFDI has also increased quite rapidly during that surge. Turkey’s globalization, based primarily on international trade since 1980, culminating in the customs union with the EU in 1996, depends now on both IFDI and OFDI, through which Turkey is integrated into the international production system. However, Turkey appears still relatively under-globalized in terms of the activities of foreign multinationals in Turkey and those of Turkish multinationals abroad.
According to Table 1, Turkey’s IFDI flows, after surging in 2005 and peaking in 2007, have plummeted during the 2008-2009 global economic crisis in tandem with the global FDI trends. (According to most recent Undersecretariat of the Treasury data, the decline has continued this year, as total IFDI during January-May decreased by 34 percent relative to the same period in 2009.) Although in 2007, Turkey’s IFDI flows as a percentage of gross fixed capital formation was between the percentages for developing countries and the world, they dropped below both of those percentages in 2009. According to Table 2, Turkey’s IFDI stocks, as a percentage of gross domestic product (GDP), after approaching the percentages for developing countries and the world in 2007, have also dropped below both those percentages. In Table 3, Turkey’s rankings of IFDI Performance and Potential Indices tell us how Turkey has actually performed in contrast to how it could have performed in attracting IFDI relative to the rest of the world. The Inward FDI Performance Index ranks countries by their IFDI relative to their economic size, in terms of the ratio of a country’s share in global IFDI flows to its share in global GDP. The UNCTAD Inward FDI Potential Index is based on 12 economic and structural variables, as the unweighted average of scores on the following variables: GDP per capita, real GDP growth rate, share of exports in GDP, telecoms infrastructure (average number of telephone lines per 100 inhabitants, and mobile phones per 100 inhabitants), commercial energy use per capita, share of research and development (R&D) expenditures in GDP, share of tertiary level students in population, country risk, exports of natural resources as a percentage of world total, imports of parts and components of electronics and automobiles as a percentage of the world total, exports of services as a percentage of world total and IFDI stock as a percentage of world total. The rankings in Table 3, which have fluctuated over time due to changes in the number of countries ranked as well as changes in Turkey’s own conditions, indicate that Turkey has performed mostly below its potential in attracting IFDI.
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According to Table 1, Turkey’s FDI outflows, despite their recent brief surge, are still minuscule, relative to its inflows and relative to global outflows as well as outflows from developing countries. (But we should keep in mind that the Turkish official data grossly underestimate the actual OFDI flows.) Table 2 also reinforces the result inferred from Table 1 that in terms of its OFDI flows Turkey’s globalization is still lagging by global benchmarks. Its outward FDI stocks are rather insignificant percentages of GDP compared with the percentages in the world and in developing countries.
In summary, although Turkey’s globalization through FDI, especially IFDI, has accelerated in recent years, it still lags behind the rest of the world. Given the still widespread suspicion, stemming from historically deep-rooted fears of exploitation and domination, of foreign business activities at home, and the country’s still fragile economic and political stability, the resurgence of IFDI is far from assured. Given also the less prevalent but nonetheless significant opposition to Turkish business activities abroad, based on concerns about the loss of investments and jobs at home, Turkey’s FDI-based globalization is promising but precarious. Turkey’s emergence as a strong regional power, with rising global influence, depends significantly on its greater FDI-based globalization, based on the many economic and non-economic benefits of IFDI and OFDI.
