Despite an uncertain global economic environment Turkey is
riding on a wave of increasing foreign investment; it has doubled
in the past five years with investments still expected to rise
Investors are focusing on the automotive sector as well as
sectors with a high technology component. Other sectors such as
business services and transport and logistics have also drawn
serious investor attention.
Infrastructure, a successful economy, a large domestic market
and low taxes and incentives are driving the jump in investments.
Turkey's highly qualified, skilled and cost effective labour
force are attractive to foreign investors. A majority of potential
investors believe Turkey's accession to the European Union will
also improve the country's investment attractiveness.
More than half of total respondents in a 2013 Ernst and Young
survey expressed their intention to invest in operations in Turkey
within the next three years.
The Customs Union Agreement of Turkey with the European Union
represents a huge opportunity for investors looking for a
relatively low cost export base for the European market.
It is also possible for companies located in Turkey to make a
duty free trade with other European Union countries.
Turkey offers a competitive tax system to investors with local
regulations, tax treaty network, special free zones and incentive
tools. Recent tax law amendments have reduced tax rates and the
depreciation rules and investment allowance system provide
opportunities to lower the effective corporate tax rates.
Istanbul is by far the city most favored by investors,
attracting over half of the total foreign direct investment
projects that came to Turkey between 2007 and 2012. Other Turkish
cities Izmir, Ankara and Bursa have also shown recent signs of
strong investment growth.
Turkey is a country that offers a central location to many
markets including the Middle East, Africa and Europe. With United
Arab Emirates and Qatar both strong markets it puts Turkish
investment in a very strong position.
While the European invesment market is slowing, it is still an
important market to be in or have easy access to, which is what
makes Turkey so desirable.
Perhaps the most significant attraction to Turkey is its
demographic advantage. Turkey boasts 76 million inhabitants with
about 20% under the age of 14.
Economist Jim O'Neill believes Turkey is very much an
emerging economic giant and with really good "inner"
demographics for at least the next 20 years there will be a rise in
the number of people eligible to work relative to those not
working. Turkey has a burgeoning middle class. That means a
compelling consumer opportunity.
The Turkish market remains extremely under-penetrated for the
general partners. Private equity currently accounts for about 0.1%
of Turkish GDP. In the BRIC countries the equivalent figure is more
than three times that, while in the US it is around 10 times
Compared to big emerging markets like China and India, the
market isn't particularly crowded – which could benefit
both general partners and limited partners.
Sanction-hit Russia has become an even more difficult place to
invest in and some limited partners believe that Turkey will pick
up some of the capital originally earmarked for this region.
The future for Turkey looks bright and if the government
eliminates remaining obstacles such as bureaucracy and inadequate
legal infrastructure Turkey will be a shining star in the
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