Last year foreign direct investment (FDI) in Turkey increased by 74 percent, with foreigners investing some $15.7 billion into the country, according to data from government website Invest in Turkey. This is because everything about Turkey tells investors it is an incredibly good place to invest in over the coming years.
Strong, stable and safe
Turkey is not only one of the top three fastest growing economies in the world, but it is also financially and politically one of the most stable countries in the world.
In 2002 the Justice and Development Party (AK Party) came in on a wave of Turkey's discontentment and almost rhythmically cyclic boom-bust cycle that had earned it the title Sick Man of Europe. Roaring inflation, military ownership of government and corruption meant that every period of growth was followed by a period of depression that cancelled out the boom.
The AK Party has been re-elected three times under the charismatic Prime Minister Recep Tayyip Erdoğan and his team of very able ministers of real-world businessmen and bankers, now elected politicians, each time winning a larger majority, showing the Turkish people are very happy with their government, resulting in a politically very stable Turkey.
During Erdoğan's time in office the AK Party has focused on running down public debt. When the AK Party took over in 2002 Turkey's public debt was 74 percent of gross domestic product (GDP), in 2010 it was around 42 percent of GDP according to International Monetary Fund (IMF) and Eurostat estimates. During the same time Turkey also paid over almost two-thirds of its IMF debt back as well, from owing $23.5 billion in 2002 to $7 billion in 2009, and has continued to reduce debt ever since. It is estimated that Turkey will have paid back all its debt to the IMF by 2015. But the biggest irony is Turkey ended its standby agreement with the IMF in early 2010, just a few months before Greece was forced to ask for its first of two bailouts.
During this the AK Party has massively reformed the banking system, increasing foreign exchange requirements, and posted an office of the central bank in every bank to take daily reports. It has also gone to great lengths to remove the military involvement in governance, culminating in the new constitution which will see Turkey's military come under the authority of the civil justice system for the first time in history.
Turkey now has low inflation (or certainly much lower), a solid banking system, low public debt and a government that is not only stable but which gives people confidence it can manage Turkey's economy well into the future. All this gives investors confidence to invest in Turkey.
Strong but sustainable economic growth
In the last couple of years, Turkey has made the headlines, first for becoming one of the fastest growing economies in the world, enjoying double-digit quarters in 2010, and then for becoming the fastest growing economy in the world in 2011. According to the government, Turkish GDP grew by 8.9 percent in 2010 or by 6.7 percent according to the IMF and CIA World Factbook, either way impressive. In 2011 the CIA calculates growth at an estimated 6.6 percent for 2011.
Between 2002 and 2010 Turkish GDP grew from $230 billion to $736 billion. During this period growth has averaged 4.8 percent per year. So even adding on the 6.6 percent growth for last year, we can still see that Turkey's economy is currently growing very strongly and its growth is sustainable over the long term.
Of Turkey's large 74 million population, half of the people are below the age of 29, which gives it the largest youth population in the EU according to 2010 data. Turkey has a young, dynamic population which is well educated and strongly multicultural. This is of course a strength for investors with an excellent pool of young workers to draw on for growing businesses.
Free trade/visa-free agreements
During the last two years Turkey has been almost relentless in its endeavor, expanding its sphere of influence by increasing its relations with countries across the world. This has led to the country successfully negotiating around 30 free trade/visa-free deals during this time, and countless other agreements to take steps on increasing trade with Turkey. Some of the highlights of Turkey's two-year mission include: America and Turkey agreed to work hard on doubling their trade; Russia and Turkey signed a visa-free deal and also agreed to work hard to increase trade between their countries; Turkey and Brazil agreed a strategic partnership, including trade incentives and other measures to induce increasing trade and mutual benefit; visa-free deals with Portugal, Lebanon, Albania, Syria, Jordan, Libya, Kosovo, Seychelles, Ukraine, Cameroon and more. In total Turkey has bilateral free trade agreements with 20 countries as well as being in the EU Customs Union.
The AK Party is very investor friendly and since 2002 has set its stall out to make Turkey very attractive to international investors. New legislation in 2003 set Turkey up as a strongly liberal country for foreign investment; for example, the average time taken to form a company in Turkey is six days, compared to the Organization for Economic Cooperation and Development (OECD) average of 13 days. What's more, all investors are treated equally and transfers are guaranteed for all. There are also many incentives like the R&D and Innovation Support Law signed in 2008 offering a series of tax incentives and support mechanisms to facilitate investment and advancement in R&D, including development of new technology and product improvements. Turkey also has a very investment friendly tax regime; a few examples: corporate income tax reduced from 30 percent to 20 percent; individual income tax varies from 15 percent to 35 percent; tax benefits and incentives in technology development zones, industrial zones and free zones could include total or partial exemption from corporate income tax, up to 80 percent grant on employer's social security share, as well as land allocation and a region and sector-based incentive system -- all international investor friendly.
Large domestic market
Because of the rapid economic growth in Turkey, or rather because of the employment and wage growth it gives birth to, the Turkish population is becoming more and more affluent with greater liquidity in the banking system improving their access to credit. Demand for Western mod-cons is growing rapidly in Turkey.
Another example of Turkey's growth is the adoption of technology. In 2002 there were 4 million people on the Internet in Turkey, as of 2010 there were 35 million people on the Internet. During the same period the number of mobile phone users (GSM) has tripled from 23 million to 62 million. And consumers also help the growth; the number of credit card users has almost tripled from 16 million in 2002 to 46 million in 2010. And finally 102 million Turks travelled by air in 2010 compared to just 33 million in 2002.
Turkey's geographical benefits are apparent to anyone with two eyes as soon as they look at a map. The country is a natural bridge between east and west, with Asia on one side and Europe on the other. It is also a north south bridge linking the Middle East to the south with Europe and Russia to the north. As a result Turkish businesses have easy access to 1.5 billion customers in Europe, Eurasia, the Middle East and North Africa and access to markets with a total GDP of $23 trillion.
Turkey, the place to invest
As you can see, Turkey has a great deal to offer investors, right down from the populous simplicity of rising tourism, rising FDI, rising employment, rising exports and a falling trade deficit to the details mentioned before. In fact, Turkey was ranked as the 15th most attractive FDI destination for 2008-2010 by the United Nations Conference on Trade and Development (UNCTAD).
International big businesses are also quickly realizing the opportunities presented by Turkey. Earlier this month British Telecom announced plans to double its investments in Turkey to turn İstanbul not only into a regional hub for its business, but a global center of satellite excellence.
Vodafone, which is now the second biggest mobile phone provider in Turkey, has just announced that it will also make Turkey its regional base of operations for the Middle East and North Africa. The firm has also announced a massive expansion of its R&D efforts within Turkey to launch the next generation in mobile payment systems in conjunction with Visa. Turkey is to be one of just five countries in which Vodafone will begin using the near-field communication (NFC) technology.
Opportunities for investment are abundant in Turkey, from the many real estate and tech companies to sectors like mining, agriculture and infrastructure development. For example, the government is to start the privatization of highways and bridges by the middle of this year, which will mean a massive amount of investment opportunities. And there are many, many more to be found for those who are clever enough to see the investment opportunities Turkey has to offer.
*David Walker is the chairman of UK-based real estate agent Spot Blue, a firm specializing in Turkey property. He is also the deputy chairman of the Turkish British Chamber of Commerce & Industry.