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The U niversity of Economics in Katowice/Poland

The U niversity of Economics in Katowice/Poland. F OREIGN D IRECT I NVESTMENTS in Turkey FDI. The U niversity of Economics in Katowice/Poland. Part Two FDI – The Case of Turkey Intensive Programe Seminar of teachers and students 1st-13th May 2006 HONIM / Brussels.

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The U niversity of Economics in Katowice/Poland

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  1. The University of Economicsin Katowice/Poland FOREIGN DIRECT INVESTMENTSin Turkey FDI

  2. The University of Economicsin Katowice/Poland Part Two FDI – The Case of Turkey Intensive Programe Seminar of teachers and students 1st-13th May 2006 HONIM / Brussels

  3. The University of Economicsin Katowice/Poland Authors: Anna Brzęska Anna Gandor Edyta Tyc Artur Barski Sławomir Czech Session led by: PhD Joanna Czech-Rogosz

  4. 24th of January 1980 • Opening to foreign markets • Export-led growth • Reducing the public sector • Privatization and liberalization • Development of banking and financial institutions

  5. 24th of January 1980 • No currency restrictions • Free low of capital • Establishment of capital market and reorganization of Istanbul Stock Exchange • Encouraging investments

  6. EU enlargement 2005 2015?

  7. Accession features • Advanced integration • Demographic dynamism • Duality of economy • Migration threat

  8. Economic freedom Lassez faire!!!

  9. GDP ratio Very unstable growth Only 30% of EU average

  10. Low employment Turkey 46% EU15 65% EU25 63% Poland 52% (Employed / work force population ratio)

  11. Inflation High inflation numbers in the late 90s Over 80% in 1998

  12. Turkey & FDI Performance Potential

  13. Historical data

  14. FDI/GNP Developing countries 28% African countries 21% FDI per capita Developed countries 2245$ World average 528$ FDI ratios Turkey 92$ Turkey 5%

  15. FDI breakdown 40% 58%

  16. Foreign companies 70% EU

  17. Investor is making decision Safety of investment? Where to invest? What do they offer? Possibility of high profits?

  18. Competitive locations East Europe Greece Russia North Africa

  19. What to invest in? • Mobile telecommunications • E-business • Banking • Internet

  20. What to invest in? • Automotive • Electronics

  21. Turkish gain on investments • Improved competitiveness • Research & Development boost • Employment

  22. TURKISH FDI DETERMINANTS

  23. GENERAL • Huge domestic market (70 mln people) • Location at the crossroads between East and West • High labor force potential

  24. STABILITY • Low political stability • Accomplishment of structural reforms • Improved resilience to shocks, reduced vulnerability • EU membership expected

  25. GROWTH • High potential output • Structural reforms implemented • Privatization lags • Unstable historical growth

  26. LEGAL SYSTEM • Business legislation not sufficient enough • Poor implementation of laws • Incompetent bureaucracy

  27. LEGAL SYSTEM ctnd. • Frequent changes in legislation • Lack of political culture • Corruption and bribery • Unnecessary sectoral licenses

  28. TAXES • Increasing tax burden • Lack of viable tax system • Vast unregistered economy

  29. INCENTIVES • Country promotion inadequate • Generous incentives for investors • No discrimination between foreign and domestic investors I need information about Turkey!!!

  30. LABOR • Good competitiveness • High skilled • Increasing labor costs • Large and low efficient agricultural sector

  31. INTELLECTUAL PROPERTY RIGHTS • Crucial importance for development • IPR protection in place, but ineffective • EU standards missing

  32. LAND • Shortage of appropriate land for investments • No space planning • Rehabilitation of Organized Industrial Zones needed

  33. INFRASTRUCTURE • Poor transportation infrastructure • Basic infrastructure insufficient • Low R&D support • Monopolization of essential branches

  34. Late improvements FDI law enacted Company establishment simplified 19 3

  35. The Foreign Direct Investment Law of 2003 • Freedom to invest • Freedom of profit transfers • Acquisition of real estates • International arbitration allowed • Employment of foreign staff It’s getting better!!

  36. Major FDI obstacles • Poor legislation • Over-regulation • Bureaucracy • Slow pace of reforms • Political resistance

  37. Investors’ institutional fears • Political interference • Weak justice system • Corruption • Poor implementation of IPR

  38. Investors’ economic fears • Lack of economic stability • Chronic inflation • Exchange rate instability

  39. Selected bibliography to the 2nd Part • Gros D., (2005) Economic aspects of Turkey’s Quest for EU membership, CEPS Policy Brief no. 69/2005. • Investment Environment and Foreign Direct Investments in Turkey, (2004) Working Paper for Investors Advisory Council Meeting in March 2004, Turkish Industrialists’ and Businessmen’s Association, Istanbul. • Loewendahl H. and Ertugal-Loewendahl E., (2001) Turkey’s Performance in Attracting Foreign Direct Investment, Implications of EU Enlargement, European Network of Economic Policy Research Institutes Working Paper no. 8.

  40. Thank you for your attention!! Have a nice day!

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