protection and promotion of investments in the mediterranean: the case of turkey

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Investment Support and Promotion Agency of Turkey (ISPAT) REPUBLIC OF TURKEY PRIME MINISTRY “Protection and promotion of investments in the Mediterranean: The Case of Turkey” Necmettin KAYMAZ Chief Project Director The Parliamentary Assembly of the Union for the Mediterranean, Meeting of the Committee on Economic & Financial Affairs, Social Affairs & Education Ankara, 01 December 2014

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Page 1: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Investment Support and Promotion Agency of Turkey

(ISPAT)

REPUBLIC OF TURKEY

PRIME MINISTRY

“Protection and promotion of investments in the Mediterranean:

The Case of Turkey”

Necmettin KAYMAZ Chief Project Director

The Parliamentary Assembly of the Union for the Mediterranean, Meeting of the Committee on Economic & Financial Affairs, Social Affairs & Education

Ankara, 01 December 2014

Page 2: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

AGENDA

Global FDI Landscape

FDI potential of UfM

The Case of Turkey:

Positioning itself as an attractive FDI destination

Improving Investment Climate in Turkey

Improving Investment & Trade Relations with UfM

Page 3: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Global FDI Landscape

Page 4: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Global FDI Landscape

Source: UNCTAD

Fierce Competition

Global FDI Flows ($ Trillion)

0,6

0,7

1,0

1,5

2,0

1,8

1,2

1,4

1,7

1,3 1,5

0,0

0,5

1,0

1,5

2,0

2,5

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

Advanced Economies Developing Economies

Around $1,5 trillion FDI is being circulated annually in the world over the past decade

Fierce competition between advanced and developing economies to attract FDI

61% of Global FDI went to developing economies in 2013, up from 34% in 2007

Page 5: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Global FDI Landscape

Source: UNCTAD

Main Benefits of FDI

Long-term capital inflow

Employment

Integrating local companies into Global Value Chain, hence

increasing their competitiveness

Technology transfer

Improving labor skills

Improving exports

Benefits of FDI

Why are countries competing to attract FDI?

Page 6: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Global FDI Landscape

Source: UNCTAD World Investment Report 1998: Trends and Determinants.

Determinants of FDI

Host country determinants

1. Policy Framework • Economic, political & social stability • Rules regarding entry & operations • Policies on functioning and structure

of markets • International agreements on FDI • Privatization policy • Trade policy • Tax policy

2. Economic determinants

3. Business facilitation • Investment promotion & facilitation • Investment incentives • Hassle costs (related corruption,

administrative efficiency, etc.) • Social amenities (bilingual schools,

quality of life, etc.) • After-investment services

Motives of TNCs

Principal economic determinants in the host countries

A. Market-seeking

•Market size, income per capita •Market growth • Access to regional & global markets • Country-specific consumer preferences • Structure of markets

B. Recourse/asset seeking

• Raw materials • Low-cost unskilled labor • Skilled labor • Technological, innovatory & other created assets

(e.g. brand name), including as embodied in individuals, firms and clusters • Physical infrastructure (port, roads..)

C. Efficiency-seeking

• Cost of resources & assets listed under B, adjusted for productivity for labor resources •Other input costs , eg. Transport &

communication costs to/from /within host economy and cost of other intermediate goods •Membership of a regional integration

agreements conducive to the establishment of regional corporate networks

H o s t c o u n t r y d e t e r m i n a n t s o f F D I

Page 7: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

FDI Potential of UfM

Page 8: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

FDI potential of UfM

FDI Flows into UfM Countries 2003-2013

Destination $ Billion

EU 28 4.721,8

Turkey 136,5

Israel 88,2

Egypt 63,9

Lebanon 38,6

Morocco 24,8

Jordan 21,3

Algeria 19,7

Tunisia 16,7

Syria* 9,2

Albania 7,7

Montenegro 7,0

Bosnia and Herzegovina 6,5

Mauritania 5,2

Palestine 1,3

TOTAL 5.168,6

UfM attracted 35% of Global FDI (32% to EU28)

Source: UNCTAD Note: No data available for Monaco *Self-suspended

UfM attracted over $5 trillion FDI between 2003-2013

FDI Flows

300

244

535

650

923

611

402 420

532

260 291

0

200

400

600

800

1000

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Other UfM

EU28

FDI Flows into UfM ($ Billion)

Page 9: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Outward FDI Flows from UfM 2003-2013

Source $ Billion

EU 28 6.143,2

Israel 63,9

Turkey 20,5

Lebanon 8,5

Egypt 5,9

Morocco 3,6

Algeria 1,4

Other UfM countries 1,8

TOTAL 6.248,8

Over 41% of Global FDI was done by UfM, led by EU with 40%

Source: UNCTAD

FDI Inflows

UfM invested over $6 trillion abroad between 2003-2013

298

381

609

706

1272

997

390

496

595

246 260

0

150

300

450

600

750

900

1050

1200

1350

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Other UfM

EU28

FDI Flows from UfM ($ Billion)

FDI potential of UfM

Page 10: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Greenfield FDI Projects in UfM 2003-2013

Destination $ Billion

EU28 1.944,0 Turkey 119,8 Egypt 111,0 Algeria 69,8 Morocco 51,3 Tunisia 45,4 Jordan 42,5 Syria* 33,7 Israel 17,4 Bosnia & Herzegovina 14,1 Lebanon 11,6 Albania 10,6 Mauritania 4,2 Montenegro 3,9 Palestine 1,2 TOTAL 2.480,5

UfM attracts 27% of Global Greenfield FDI, (21% by EU28)

Source: fDi Intelligence

UfM attracted c. $2,5 trillion Greenfield FDI between 2003-2013

Greenfield Investment

156 158

212

269 288

409

268

199 203

164 155

0

50

100

150

200

250

300

350

400

450

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Other UfM

EU28

Greenfield FDI Projects in UfM ($ Billion)

FDI potential of UfM

Page 11: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Greenfield FDI Projects in UfM 2003-2013

Source $ Billion

EU 28 3.536,1 Israel 53,2 Turkey 41,8 Egypt 18,2 Lebanon 7,5 Jordan 4,7 Tunisia 1,8 Algeria 1,7 Morocco 1,6 Rest of UfM 1,7 TOTAL 3.668,1

39% of Global Greenfield FDI is done by UfM (38% by EU28)

Source: fDi Intelligence

UfM invested $3,7 trillion Greenfield FDI abroad between 2003-2013

Potential

293

236 255

336

385

573

424

366 335

225 241

0

100

200

300

400

500

600

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Other UfM

EU28

Greenfield FDI Projects by UfM ($ Billion)

Greenfield Investment

FDI potential of UfM

Page 12: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

The Case of Turkey: Positioning itself as an attractive FDI destination in

the region

Page 13: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: IMF World Economic Outlook April 2014, Eurostat, OECD, TurkStat, OECD Economic Outlook No.93, May 2013

4,9

4,6

4,3

4,1

4,0

3,7

3,5

3,4

3,4

2,6

2,6

1,8

1,1

1,1

0,9

0

1

2

3

4

5

Average Annual Real GDP Growth (%) 2002-2013

5,1

5,0

4,6

4,1

3,8

3,7

3,5

3,3

3,3

3,2

3,2

3,0

2,9

2,7

2,7

2,6

2,4

2,1

2,1

2,0

2,0

1,9

1,7

1,7

1,5

1,5

1,5

1,4

1,4

1,3

1,2

1,1

1,0

1,0

0,8

0,8

0,8

0,2

0,1

0

1

2

3

4

5

6

Turk

ey

Ch

ile

Sou

th A

fric

a

Ko

rea

Arg

enti

na

Bra

zil

Isra

el

Au

stra

lia

Ru

ssia

Slo

vaki

a

Mex

ico

Esto

nia

Po

lan

d

No

rway

Swed

en

Luxe

mb

ou

rg

Ne

w Z

eal

and

Cze

ch R

ep.

Swit

zerl

and

US

Can

ada

OEC

D

Au

stri

a

UK

Fran

ce

Fin

lan

d

Bel

giu

m

Ne

the

rlan

ds

Irel

and

Hu

nga

ry

Ge

rman

y

Slo

ven

ia

Euro

are

a

Den

mar

k

Jap

an

Icel

and

Spai

n

Po

rtu

gal

Ital

y

Average Annual Real GDP Growth (%) 2012-2017

Strong record, bright future

Economic Performance

Turkey: Positioning itself as an attractive FDI Destination

Page 14: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: Indicators are based on the compilations of OECD and Turkstat data

Quarterly Real GDP Growth (Index: Q1-2009=100) Seasonally adjusted

Fastest growing economy in Europe and one of the fastest growing economies in the world

The fastest recovering economy since the onset of global financial crisis in 2009

95

100

105

110

115

120

125

130

135

140

Q1

-20

09

Q2

-20

09

Q3

-20

09

Q4

-20

09

Q1

-20

10

Q2

-20

10

Q3

-20

10

Q4

-20

10

Q1

-20

11

Q2

-20

11

Q3

-20

11

Q4

-20

11

Q1

-20

12

Q2

-20

12

Q3

-20

12

Q4

-20

12

Q1

-20

13

Q2

-20

13

Q3

-20

13

Q4

-20

13

Q1

-20

14

Q2

-20

14

Turkey

Russia

Brazil

Poland

Czech Rep.

Hungary

Economic Performance

Turkey: Positioning itself as an attractive FDI Destination

Page 15: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: TurkStat

Main Drivers of the Economic Growth

67,6%

29,7% 29,7%

10,1% 5,5%

-1,8%

-40,9%

-45%

-25%

-05%

15%

35%

55%

75%

Contribution to Real GDP Growth 2002-2013

An economy driven by entrepreneurial spirit of private sector, robust domestic market and lucrative export opportunities

Manufacturing; 27,1%

Financial intermediation;

18,3% Transport, storage &

communication; 17,1%

Wholesale & retail trade;

14,3%

Other; 23,3%

Contribution to Real GDP Growth 2002-2013

Economic Performance

Turkey: Positioning itself as an attractive FDI Destination

Page 16: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Gross Public Debt Stock (% of GDP)

Strong macroeconomic fundamentals

Maastricht Criteria: 60 % Maastricht Criteria: -3 %,

74

36,3

60,3

89,4

30

35

40

45

50

55

60

65

70

75

80

85

90

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

TURKEY

EU

Source: Treasury, European Commission,

-10,2

-1,6 -2,5

-3,3

-12

-9

-6

-3

0

20

02

20

03

20

04

20

05

20

06

20

07

20

08

200

9

20

10

20

11

20

12

20

13

TURKEY

EU

Central Government Budget Balance (% of GDP)

Economic Performance

Turkey: Positioning itself as an attractive FDI Destination

Page 17: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: UN, IMF, national sources

2013 Ranking of Countries with Population over 70 million

1.367

1.261

319

252

203

188

179

157

146

127

120

100

90

88

87

81

78

77

- 300 600 900 1.200 1.500

China (1)

India (2)

US (3)

Indonesia (4)

Brazil (5)

Pakistan (6)

Nigeria (7)

Bangladesh (8)

Russia (9)

Japan (10)

Mexico (11)

Philippines (12)

Vietnam (13)

Ethiopia (14)

Egypt (15)

Germany (16)

Iran (17)

Turkey (18)

Population

(Million)

16.768

9.469

4.899

3.636

2.246

2.097

1.877

1.261

870

822

522

367

272

271

233

171

162

46

- 5.000 10.000 15.000 20.000

US (1)

China (2)

Japan (3)

Germany (4)

Brazil (5)

Russia (6)

India (7)

Mexico (8)

Indonesia (9)

Turkey (10)

Nigeria (11)

Iran (12)

Philippines (13)

Egypt (14)

Pakistan (15)

Vietnam (16)

Bangladesh (17)

Ethiopia (18)

GDP

($ Billion)

52,6

45,0

38,5

14,4

11,1

10,8

10,5

6,9

4,7

3,5

3,1

2,9

2,7

1,9

1,5

1,2

1,0

0,5

0 10 20 30 40 50

US (1)

Germany (2)

Japan (3)

Russia (4)

Brazil (5)

Turkey (6)

Mexico (7)

China (8)

Iran (9)

Indonesia (10)

Egypt (11)

Nigeria (12)

Philippines (13)

Vietnam (14)

India (15)

Pakistan (16)

Bangladesh (17)

Ethiopia (18)

GDP per capita

($K)

Turkey: Positioning itself as an attractive FDI Destination

Domestic Market

Page 18: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: TURKSTAT, OECD

30,3

23,8

20,9

16,4

13,3

8,4 6,8

4,4 3,7 2,8 2,3

2,1

0

5

10

15

20

25

30

35

200

2

200

3

2004

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

Percentage (%) of Poor People Living on Less than $4,3 Per Day

63,6

47,4

40,5 40,2 39,8 39,2 34,3

30,8

25,1

7,3 0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10

Lowest income

top income group

Real Increase (%) in Household Income 2002-2012

I n c o m e D e c i l e G r o u p s ( 1 0 % )

-0,1

-0,08

-0,06

-0,04

-0,02

0

0,02

0,04

0,06

Turk

ey

Mex

ico

Irel

and

Gre

ece

Bel

giu

m

Spai

n

Hu

nga

ry

Ital

y

Slo

vaki

a

Po

rtu

gal

UK

Po

lan

d

Cze

ch R

ep.

Jap

an

No

rway

Ko

rea

Fran

ce

USA

Au

stri

a

Au

stra

lia

Ger

man

y

Fin

lan

d

Den

mar

k

Can

ada

Swed

en

Percentage point changes in the Gini coefficient (Mid-1990s to Mid-2000s)

Increasing income

Turkey: Positioning itself as an attractive FDI Destination

Page 19: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Rise of the middle-class in Turkey

Source: Euromonitor International; Credit Suisse, Adults are defined to be individuals aged 20 or above

0

2

4

6

8

10

12

14

16

18

2002 2013

10,6

2,3

5,3

18,0

1,0

9,5

Income < $10K Income > $10K Income > $25K

Number of Households by Annual Disposable Income (million)

5000

10000

15000

20000

25000

30000

2002 2013

11.141

25.909

Wealth per Adult ($)

Increasing income

Turkey: Positioning itself as an attractive FDI Destination

Page 20: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: TurkStat

Changing consumption culture with increasing purchasing power and lower liabilities

Food & Housing

54%

Other 46%

2002

Allocation of Household Consumption Expenditures (%)

Increasing Income

21

65

85

0

20

40

60

80

100

Turkey Euro Area USA

Household Liability % of GDP

(2012)

Turkey: Positioning itself as an attractive FDI Destination

Food & Housing

45% Other 55%

2013

Page 21: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: TURKSTAT

Increasing export

Export (US$ Billion)

36,1

47,3

63,2

73,5

85,5

107,3

132

102,2

114

135

152 152

35

50

65

80

95

110

125

140

155

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Export Opportunities

Turkey: Positioning itself as an attractive FDI Destination

Page 22: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Customs Union with the European Union

Free Trade Agreements with 25 countries

Source: Ministry of Economy, * In ratification process *

1. Albania 14. Tunisia

2. Bosnia & Herzegovina 15. Montenegro

3. Egypt 16. Serbia

4. Georgia 17. Chile

5. Iceland 18. Jordan

6. Israel 19. Mauritius

7. Lichtenstein 20. South Korea

8. Macedonia 21. Lebanon*

9. Morocco 22. Kosovo*

10. Norway 23. Ghana*

11. Palestine 24. Malaysia*

12. Switzerland 25. Moldavia*

13. Syria

Free Trade

Export Opportunities

Turkey: Positioning itself as an attractive FDI Destination

Page 23: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: IMF World Economic Outlook and WTO; GDP, Imports and population figures as of 2013

Access to Multiple Markets

1,5 Billion People

$26 Trillion GDP,

over $8 trillion trade

(45% global trade)

at a 4-hour flight

distance

Strategic Location

Turkey: Positioning itself as an attractive FDI Destination

EUROPE

GDP: $19.7 trillion Import: $6,6 trillion Population: 670 million

RUSSIA

GDP – $2.1 trillion Import: $344 billion Population: 143 million

CENTRAL ASIA & CAUCASUS

GDP: $433 billion Import: $106 billion Population: 84 million

MENA

GDP: $3,7 trillion Import: $1 trillion Population: 665 million

Page 24: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

A Manufacturing Hub

Source: Deloitte, oica, worldsteel, turkbesd TURKEY TURKEY TURKEY

T U R K E Y

Turkey will be the 16th manufacturing hub in the world and 2nd in Europe

Strategic Location

Turkey: Positioning itself as an attractive FDI Destination

Turkey is already;

17th largest automotive manufacturer in the world & the largest commercial vehicle manufacturer in Europe (2013)

8th largest steel manufacturer in the world & 2nd in Europe (2013)

Largest TV & white goods manufacturer in Europe (2013)

Page 25: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Turkey emerges as a regional manufacturing hub for global firms

SOURCE: TSKB

PCs and peripherals • Tripling production with new investment • To export 90% of total

production

Heavy commercial vehicles • New model to be

manufactured in Turkey and exported to 65 countries

Energy • Tripling production to export to countries in

Europe, North Africa, and South America

FMCG

• Production base for the Middle Eastern and North African markets

Filters and generators • 85% of total

production to be exported

Textile • Moving all

production volume to Turkey

New line of trucks

•Regional manufacturing

hub for new line of trucks

• Annual production capacity of 150K units

• Total FDI 1.6 Bn USD • Exports to 30 countries

Strategic Location

Turkey: Positioning itself as an attractive FDI Destination

Page 26: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Turkey is also becoming a regional management hub for global firms

Company Regions managed from

Turkey Rationale behind chosing Turkey as a management hub

90 countries • Eurasia • Africa

“Turkey is a strong country due to its dynamic economy and young population” -Ahmet Bozer, Executive Vice President and President of Coca Cola International, 2011

79 countries • Middle East • Africa

“Besides, the business opportunities Istanbul offers, its educated workforce and infrastructure supporting expats are important” -Ala Faramawy, VP Microsoft International, 2011

64 countries • Middle East • Africa

"Turkish managers have the European business ethics and discipline and the strong communication skills of Eastern managers" –Intel's Business Dev.Manager, Burak Aydın, 2012

20 countries • Caucasus • Central Asia • Eastern Europe

"Pfizer Turkey is referred to as 'A School of Leaders', since it continuously transfers successful executives to Pfizer companies worldwide. Today, more than 35 Turkish senior executives are appointed to Pfizer affiliates all around the world. " –ISPAT website, 2012

Source: Press releases

Strategic Location

Turkey: Positioning itself as an attractive FDI Destination

Page 27: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Largest youth population as compared to EU; half of the population is under age 30

Population Pyramid (%)

5 4 3 2 1 0 1 2 3 4 5

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90+

Female Male

%

Age Group TURKEY

5 4 3 2 1 0 1 2 3 4 5

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90+

Female Male

%

Age Group EUROPE

Source: Turkstat, Eurostat, UN, 2013

77 million young & dynamic people

5 4 3 2 1 0 1 2 3 4 5

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90+

Female Male

%

Age Group ASIA

Demographics

Turkey: Positioning itself as an attractive FDI Destination

Page 28: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: UN

Favorable

Demographic

Trend

80

85

90

95

100

105

110

115

120

125

2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Working Age Population (15-64), 2013=100

Europe

Turkey

40

50

60

70

80

90

100

2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Total Dependency Ratio (%) (Age 0-14 & Age 65+) / Age 15-64

Europe

Turkey

Labor Force

Turkey: Positioning itself as an attractive FDI Destination

Page 29: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: IMD World Competitiveness Yearbook 2014, IMD WCY Executive Opinion Survey based on an index from 0 to 10 (0 = Not available 10 = Readily available)

Skilled Labor Force 2014

6,0

5,9

5,8

5,4

5,0

4,7

3,1

0 1 2 3 4 5 6

Turkey

Romania

Czech Rep.

Poland

China

Hungary

Bulgaria

Availability of Skilled Labor Force

6,0

5,2

5,2

5,2

4,8

4,1

2,7

0 1 2 3 4 5 6

Turkey

Czech Rep.

Romania

Poland

China

Hungary

Bulgaria

Availability of Competent Senior Managers

7,1

6,8

6,7

6,22

6,0

5,6

3,9

0 2 4 6 8

Turkey

Hungary

Romania

Czech Rep.

China

Poland

Bulgaria

Availability of Qualified Engineers

Labor Force

7,0

6,5

5,7

5,4

5,4

5,2

3,6

0 1 2 3 4 5 6 7

Turkey

Poland

Romania

China

Hungary

Czech Rep.

Bulgaria

Availability of Finance Skills

Turkey: Positioning itself as an attractive FDI Destination

Page 30: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: Eurostat , TurkStat, Mercer

4,6 5,5 5,7 6,6 6,7 7,8 8,3 8,3 8,3

9,7 10,8

11,9

22

0

5

10

15

20

25 Annual average number of sick days per employee, 2008

52,0

42,7 41,9 41,9 41,7 41,5 41,5 41,5 40,8 40,4 40,1 40,0 39,6 38,8

30

35

40

45

50

55

Productive and Cost-effective Labor Force

Annual Average Hours worked per week, 2013

95

110

125

140

155

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Turkey

Poland

Czech Rep.

Hungary

Productivity: Real GDP per hour worked (Index: 2001=100)

45,8 45,0

39,2

28,8 27,2

18,8

12,4 11,5 9,7 8,8

6,9 0

5

10

15

20

25

30

35

40

45

50

Fran

ce

Ger

man

y

Irel

and

Spai

n

UK

Slo

ven

ia

Cze

ch R

ep.

Slo

vaki

a

Hu

nga

ry

Po

lan

d

Turk

ey

Labor Cost Per Hour in Manufacturing ($), 2012

Labor Force

Turkey: Positioning itself as an attractive FDI Destination

Page 31: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Improving Investment Climate in Turkey

Page 32: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

National Treatment

Guarantee of Transfers

International Arbitration

Purchase of Real Estate

Employment of Expats

International standards (IFRS & IAS)

Transparency & Accountability

Institutionalization of companies

Opportunity to perform board meetings online

27

29

30

30

31

36

37

38

39

25 30 35 40

Romania

Russia

Bangladesh

Bulgaria

Poland

Morocco

Cameroon

Turkey

Guatemala

6,5

8,0

11,2

13,0

19,0

28,4

30,0

31,4

05101520253035

Turkey

Romania

Russia

Spain

Czech Rep.

India

Poland

China

Reforms

Number of Days to Establish a Company in 2013

Number of Days to Establish a Company in 2003

New FDI Law in 2003

CIT reduced to 20% in 2006

New Commercial Code in 2012

Source: World Bank

Improving Investment Climate

Page 33: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: OECD

-0,1

0

0,1

0,2

0,3

0,4

0,5

0,6

Ch

ina

Ind

on

esia

Ind

ia

New

Ze

alan

d

Mal

aysi

a

Mex

ico

Ru

ssia

Can

ada

Icel

and

Ko

rea

Au

stra

lia

Isra

el

Au

stri

a

Bra

zil

Un

ited

Sta

tes

No

rway

Swit

zerl

and

Po

lan

d

OEC

D -

Ave

rage U

K

Turk

ey

Swed

en

Jap

an

Ital

y

Slo

vaki

a

Fran

ce

Irel

and

Arg

enti

na

Den

mar

k

Gre

ece

Hu

nga

ry

Ger

man

y

Spai

n

Fin

lan

d

Net

her

lan

ds

Cze

ch R

ep.

Luxe

mb

ou

rg

Drop in Index Score from 2003 to 2013 2013 Score

TOP REFORMERS 1. Turkey 2. Malaysia 3. Finland 4. India 5. Russia

------ OECD

Average Score

in 2013

Index Score: 1=Closed to FDI, 0=Open to FDI

M o r e R e s t r i c t i v e L e s s R e s t r i c t i v e

Reforms

FDI Regulatory Restrictiveness Index

Turkey has emerged as the biggest reformer

Improving Investment Climate

Page 34: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Investment Zones (Technology Development Zones, Organized Industrial Zones, Free Zones)

Corporate and Personal Income Tax allowances Exemption from custom duties VAT exemption Social Security Premiums Support

R&D and Innovation Support Law

R&D allowances and Enhanced Tax allowances Income Withholding Tax Deduction Cash support for entrepreneurial scientists

New incentive system (General, Regional, Large-scale, Priority, Strategic Investment) Reduced corporate tax rates Social security premium support Allocation of state land Interest support Withholding tax support

INVESTMENT INCENTIVES IN TURKEY Incentives

Improving Investment Climate

Page 35: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Bilateral Agreements for the Promotion and Protection of Investments

Turkey signed bilateral treaties with 76 countries to promote and protect investments

• Afghanistan • Albania • Argentina • Australia • Austria • Azerbaijan • Bangladesh • Belarus • Belgium • Bosnia and Herzegovina • Bulgaria • China • Croatia • Cuba • Czech Republic • Denmark • Egypt • Estonia

• Ethiopia • Finland • France • Georgia • Germany • Greece • Hungary • India • Indonesia • Iran • Israel • Italy • Japan • Jordan • Kazakhstan • Kuwait • Kyrgyzstan • Latvia

• Lebanon • Libya • Lithuania • Luxembourg • Macedonia • Malaysia • Malta • Moldova • Mongolia • Morocco • Netherlands • Oman • Pakistan • Philippines • Poland • Portugal • Qatar • Romania

• Russia • Saudi Arabia • Senegal • Serbia • Singapore • Slovakia • Slovenia • South Korea • Spain • Sweden • Switzerland • Syria • Tajikistan • Thailand • Tunisia • Turkmenistan • Ukraine • Uzbekistan

• UAE • USA • UK • Yemen

Improving Investment Climate

Page 36: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: A.T. Kearney

Likelihood of investment in a market over the next 3 years Confidence

0 0,5 1 1,5 2 2,5 3

USA (1)China (2)

Canada (3)UK(4)

Brazil (5)Germany (6)

India (7)Australia (8)

Singapore (9)France (10)

UAE (11)Mexico (12)

South Africa (13)Switzerland (14)

Malaysia (15)Sweden (16)

Chile (17)Spain (18)Japan (19)

Italy (20)Belgium (21)

Netherlands (22)Denmark (23)

Turkey (24)Indonesia (25)

Foreign Direct Investment Confidence Index 2014 (0=Low Confidence; 3=High Confidence)

Low Confidence High Confidence

Improving Investment Climate

Increasing Confidence in Turkey: FDI Confidence Index based on 300 companies’ responses

The Index examines overarching trends and ranks countries on how changes in their political, economic, and regulatory systems are likely to affect FDI inflows in the coming years.

Page 37: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: Central Bank of Republic of Turkey, *as of 2014 September, Ministry of Economy

Increasing Foreign Direct Investment (FDI)

15

146

0

30

60

90

120

150

1923-2002 (80 years) 2003-2014*

FDI Inflows ($ billion)

Investment Climate

FDI

5,6

40,9

0

5

10

15

20

25

30

35

40

45

Number of Foreign Companies (Thousand)

Page 38: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Improving Investment & Trade Relations with UfM

Page 39: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: Central Bank of Republic of Turkey, Ministry of Economy, *as of 2014 September

71% of FDI in Turkey is done by UfM (EU:70%)

Investment & Trade relations with UfM

Investment

0

3000

6000

9000

12000

15000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Other UfM

EU 28

FDI Flows from UfM into Turkey ($ million)

FDI Flows from UfM into Turkey Source Cumulative Value 2003-2014* ($ Million) EU 28 82.624 Lebanon 1.135 Israel 384 Jordan 215 Albania 5 TOTAL 84.363

Number of UfM companies in Turkey 2014*

EU 19.186

Syria** 1.503

Israel 306

Jordan 297

Egypt 277

Lebanon 276

Algeria 91

Palestine 86

Tunisia 71

Bosnia-Herzegovina 65

Morocco 63

Albania 57

Monaco 9

Montenegro 7

Mauritania 2

TOTAL 22.296

Page 40: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: Central Bank of Republic of Turkey, Ministry of Economy, *as of 2014 September **self-suspended

Turkey has invested c.$16 billion in UfM countries since 2003

0

500

1000

1500

2000

2500

3000

3500

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

201

4*

Other UfM

EU28

FDI Flows from Turkey into UfM ($ million)

FDI Flows from Turkey into UfM Cumulative Value 2003-2014*

Destination ($ Million) EU 28 14.860 Tunisia 220 Egypt 174 Bosnia -Herzegovina 148 Macedonia 110 Morocco 68 Albania 67 Lebanon 31 Algeria 29 Lebanon 31 Syria** 18 Israel 6 Jordan 4 TOTAL 15.757

Investment & Trade relations with UfM

Investment

Page 41: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

Source: TurkStat

Turkey’s foreign trade with UfM

exponentially increased and

reached $175 bn in 2013, up from

$50bn in 2002

Investment & Trade relations with UfM

Trade

23

54

64

76

-

20

40

60

80

2002 2006 2010 2013

Othe UfM

EU28

Export ($ Billion)

27

62

77

99

-

20

40

60

80

100

2002 2006 2010 2013

Other UfM

EU28

Import ($ Billion)

50

116

141

175

0

25

50

75

100

125

150

175

2002 2006 2010 2013

Export

Import

Turkey’s Foreign Trade with UfM ($ Billion)

Page 42: Protection and Promotion of Investments in the Mediterranean: The Case of Turkey

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