What Kind of Investments are Made by Foreign Investors in Turkey?
Increasing geopolitical risks in every continent of the world reduce investors' confidence in the markets. While the economic conjuncture continues to attract financial markets investors, developing and developed countries compete with each other in order to attract new investors with their monetary and fiscal policies.
Considering direct investments distributed to the entire world, Turkey is said to be one of the countries which have the highest share of this distribution. When we look at the figures from last year's foreign direct investment between January-May, we see that it increased by 11% over the same period, by passing $ 4.6 billion, and the vast majority of investment coming to Turkey is known to come from the European market. Turkey's buying the S-400 defense systems from Russia, which makes country’s political agenda busy, causes the political crisis with the United States, but seems not to affect investment decisions by the European and Gulf investors. Because if there is a profitable investment somewhere, the capital prefers to make an investment that can make more profit.
In Turkey, since 2017, the sectors of real estate, banking, clothing, food, cosmetics, health, energy and engineering received direct investments, and it shows that the purchasing power of the population under 30, which makes up about half of the country, has increased. Turkey, is ranked 13th in the world according to purchasing power parity.
Company Marriages with Foreign Investors
Looking at the league of developing countries, Turkey has advantages with geo-political geo-strategic and geo-economic differences. Especially Gulf capital countries performing marriages in the country or by investing billions of dollars as a result of the privatization, rely on Turkey. This confidence is undoubtedly stems from Turkey's experience and vision of the past to carry out structural reforms. In addition to political stability, structural reforms need to be implemented in order for the acceleration in the economic markets to reach the world-leading growth figures.
One of the things that foreign investors look at before making investment decisions is the political stability of that country. Turkey is governed by existing political party for about 20 years. There are no elections that could pose political risks for five years.
Overview of Turkey's Economic Data
Turkey's Gross Domestic Product is in 784 billion US dollars (2018 - Current Prices) level, taking place at the level of 9632 US dollars GDP per capita. According to 2018 data, the amount of exports is USD 168 billion, while the amount of imports is USD 223 billion. When we look at tourism revenues, according to 2018 data, it is USD 25.2 billion, while the annual number of tourists is 38.9 million.
The country has a total of 65,533 foreign companies and its main export markets are; Germany (9.6%); United Kingdom (6.6%); Italy (5.7%); Iraq (5.0%); USA (4.9%); Spain (4.6%); France (4.3%); Netherlands (2.8%); Belgium (2.4%); Israel (2.3%) is the main import sources; Russia (9.6%); China (6.6%); Germany (5.7%); USA (5.0%); Italy (4.9%); India (4.6%); United Kingdom (4.3%); France (2.8%); Iran (2.4%); South Korea (2.3%). While having a customs agreement with the European Union, Turkey has a free trade agreement with Albania, Bosnia and Herzegovina, members of EFTA countries (Iceland, Norway, Switzerland and Liechtenstein), the Faroe Islands, Morocco, Palestine, Ghana, South Korea, Georgia, Israel, Montenegro, Kosovo, Lebanon, Macedonia, Malaysia, Egypt, Moldova, Mauritius, Serbia, Singapore, Sudan, Syria, Chile, Tunisia and Jordan.
Which Sectors Provided Investments for Turkey?
- One of Spain's largest bank, BBVA, purchased 9.95% of the Garanti Bank, which is also one of Turkey's largest banks, for 3.3 billion TL. BBVA, which previously purchased 25% of the Bank's shares in 2010, rose to 49.85%.
- MNG Kargo, which is one of the few major shipping companies in Turkey, is completely taken over by Mirage Cargo B.V companies operating in Dubai, the Gulf countries. MNG Cargo, is a cargo company which operates with over 800 branches and 9 thousand employees in Turkey. Operating in the food sector of Turkey, Banvit's 79.48% stake has been sold for 915 million TL to BRF Brazil, and to Qatar Holding LLC. (a subsidiary of Qatar Investment Authority).
- Known as the world's largest aircraft engine manufacturer, Rolls-Royce, signs the agreement to produce and develop aircraft engines with Kale Group in Turkey. The two companies went into the partnership with 49% of Rolls-Royce and 51% for Kale Group. Following the purchase of S-400 defense missiles, causing a political crisis between Turkey and the United States and resulting a delay in the delivery of next generation F-35 fighter aircraft by the US Congress, is connected to Turkey's National Aircraft Project (TF-X) which is attributed to take the development agenda. Turkey aims to develop military aircraft engines as needed through these two companies and is known as one of the few countries that produces and exports armed unmanned aerial vehicles.
- The 150 years old German giant Bosch is increasing its turnover by 25 percent in Turkey in 2019. Steven Young, President of Bosch in Turkey and the Middle East, says that the best time to invest in Turkey by announcing they would invest 1.2 billion pounds in 2019.
- While another German giant Volkswagen, for its new production facility, makes a decision between Turkey and Bulgaria and chooses Turkey. With this new facility, which is expected to produce Skoda models, Turkey will invest 1.3 billion euros and is expected to provide employment to about 5 thousand people.
- Sephora, which is active in cosmetics sector in France, has bought 19 stores of Tekin Acar Cosmetics.
- Coca-Cola brand, Which is the main shareholder of the Anadolu Group from Turkey, opens its 10th factory in Isparta in Turkey with operating at a total of 10 countries in Central Asia and the Middle East region, 24 factory and 10 thousand employees.
- The multinational Procter & Gamble (P&G), a manufacturer of personal, home and family care products, is setting up a factory in Gebze, Kocaeli with an investment of $ 80 million to produce diapers and women's products.
- Danish LMWind Power Blades, known as the largest wind turbine manufacturer in the world, made an investment decision that worth $40 million with Turkey Sanayi ve Ticaret AS company in Turkey. With this investment in Bergama district of Izmir province, a step to achieve Turkey’s goals in the field of renewable energy is estimated to get closer.
- Akfen Holding, one of Turkey's major companies, decides to invest in Turkey by selling 40% share of the 50% stake in the port of Mersin to Australia-based IFM Investors for 6 billion 935 million pounds.
- Abraaj Investment Management, one of the companies that manage private equity funds in the financial system, acquires a significant portion of the shares of Netlog Logistics Services.
- ZTE telecommunications, the company that is China-originated and manufactures and enterprises technology solutions, took over the shares of NETAŞ that operates in the IT sector in Turkey, with an investment of over $ 100 million.
- Ajinomoto, the Japanese company, one of the largest producers of sauce in the world, acquires a 50% stake in Kükre Gıda, the owner of the Kemal Kükrer brand.
- The European Bank for Reconstruction and Development (EBRD) acquires 100 million TL shares of Enerjisa, which is owned by the Sabancı Group, and purchases 75 million TL long-term bonds of Garanti Bank.
- The Turkish company Rönesas Health Investment, which went into partnership with the Japanese Sojitz Company, provides $ 1.5 billion investment in the health sector by receiving support from 8 different financial institutions around the world for the construction of the İkitelli City Hospital in Istanbul.
- Global market players, because it has investment opportunities, prefers developing countries such as Turkey. After 2019, Turkish companies are expected to benefit from the competition between America and Russia. Starting from this year, investments in technological investments are expected to accelerate through mergers, especially in the next 10 years, the country is expected to be one of the countries exporting energy.
Real Estate Sector
Real estate investment is having the best time for investments in Turkey. In the long term, Istanbul, Bursa, Antalya and Bodrum are preferred for real estate investment, which is one of the most profitable vehicles compared to the stock market, precious metals, Forex, logistics, health and tourism sectors.
Turkey is among the countries where local and foreign investors do many real estate investments. Rising real estate values with each passing year, the strengthening of the real estate market, real estate investments in Turkey guarantees the return to the investor.
The average rate of increase in real estate investment in Istanbul in the first 5 years is 250%. For the real estate market in Bursa, this ratio is observed as 86% over a 4-year period. While the value increase rate in Antalya has been 65% in the last 4 years, the value increase of 74.8% is seen in Bodrum in the last 5 years.
In the real estate sector, which has a low risk factor, the property purchased can be held for rent, rented out or used by the investor itself. Real estate in Turkey has relatively short amortization periods, showing itself to the highest order in the list of the most frequently used means of investment by foreign investors.
Turkish Citizenship via Investment
Turkey is one of the countries that gives citizenship through investment. There are six different options for obtaining Turkish citizenship. The fastest and easiest of these options is to become a Turkish citizen by buying real estate. Especially after the decision announced in the Official Gazette in 19.09.2018, the limits to be paid to become a Turkish citizen are reduced significantly.
While being a citizen of the Republic of Turkey is much easier compared to previous periods, everyone who buys a minimum of 250,000 USD worth of real estate can benefit from the advantages of Turkish citizenship. In Turkey, not only having valuable and rich options in terms of real estate investment; but also, the convenience it provides in the citizenship process makes it much more attractive to become a citizen by buying real estate.