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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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
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
Global FDI Landscape
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
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?
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
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)
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
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
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
Total Dependency Ratio (%) (Age 0-14 & Age 65+) / Age 15-64
Europe
Turkey
Labor Force
Turkey: Positioning itself as an attractive FDI Destination
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
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
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
Improving Investment Climate in 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
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
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
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
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.
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)
Improving Investment & Trade Relations with UfM
Source: Central Bank of Republic of Turkey, Ministry of Economy, *as of 2014 September