Foreign direct investment (FDI) in Türkiye

FDI in Figures

According to UNCTAD's World Investment Report 2022, FDI inflows to Turkey increased by 60.2% to USD 12.5 billion in 2021. European countries accounted for 60% of the inflows in Turkey, followed by Asia and the Americas with 23% and 16%, respectively (UNCTAD). In the same year, the total stock stood at USD 120.7 billion (around 15% of GDP). Data by the Turkish Investment Office show that the majority of foreign investments are directed towards the finance (31.6%), manufacturing (24.2%) and energy sectors (10.6%), followed by ICT services (8.8%), wholesale and retail trade (8.4%), and transport and storage (4.7%). In terms of stocks, the Netherlands has the lead, accounting for 15.7% of total foreign investment, ahead of the United States (8.1%), the UK (7.5%), and Gulf countries (7.1%, mostly from Qatar). According to EY, Turkey became the 5th most popular FDI destination in Europe in 2021 with 264 projects (4.5% of total projects). The latest data from OECD shows that in the first half of 2022, FDI inflows to Turkey totalled USD 5.4 billion, marking a 24.4% increase compared to the same period one year earlier.

Turkey’s investment climate is positively influenced by its favourable demographics and its strategic geographical position, providing access to multiple regional markets, and has one of the most liberal legal regimes for FDI among OECD members. The country has adopted a series of legislative reforms to facilitate the reception of foreign investment, such as the creation of the Investment Office of the Presidency of the Republic of Turkey, a showcase of the efforts undertaken to attract foreign operators, and the publication of the government’s Foreign Direct Investment Strategy 2021-23. FDI inflows improved in the light of the development of public-private partnerships for major infrastructure projects, the measures to streamline administrative procedures and strengthen intellectual property protection, the end of FDI screening and the structural reforms carried out as part of the EU accession process. The factors hindering FDI development include the instability of the Turkish lira, as evidenced by the currency crises that regularly break out and bring its value to record lows, inflation that has reached double-digit rates and the proximity of conflicts in the Middle East. Overall, Turkey has a favourable business climate, ranking 45th out of 82 countries in the Economist Business Environment ranking and 52nd in the 2022 Global Competitiveness Ranking. It is also at the 128th spot out of 177 countries in the 2023 Index of Economic Freedom.

What to consider if you invest in Türkiye

Strong Points

Advantages for FDI in Turkey:

• Turkey's repeated attempts to join the European Union have helped to establish European regulations and trade standards, which have substantially liberalised the economy. 
• The Government is working to attract FDI into technology, textiles, services (health, education, public transport), telecommunications, shipbuilding, electronics and bio-technologies. 
• Because of its demographic vitality, the country has a developing young middle class population with increased purchasing power and orientation towards consumption. 
• The relatively low cost of labour
• Turkey has a strategic geographical location that allows it to be a regional hub between Europe, Asia and the MENA economic zone.  
• The Turkish market counts 85.3 million consumers

Weak Points

Some of the disadvantages for FDI in Turkey include:

• A bureaucracy that may be cumbersome to navigate
• Frequent changes in the legal and regulatory environment
• Strong dependence on exports and hydrocarbon imports
• Exchange rate uncertainty and the consequences of a public debt constantly rising
• Elevated regional geopolitical risks
• Currency plunge and high inflation

Government Measures to Motivate or Restrict FDI

The Turkish Government has played a large role in initiatives to make the country a more attractive destination for foreign investment and business operations. The Turkish government offers a comprehensive investment incentives program: general, regional, strategic and project-based investment incentives.

Turkey’s incentives program provides the following benefits to investors: corporate tax reduction; customs duty exemption; value added tax (VAT) exemption and VAT refund; employer’s share social security premium support; income tax withholding allowance; land allocation; and interest rate support for investment loans.

The incentives program gives priority to high-tech, high-value-added, globally competitive sectors and includes regional incentive programs to reduce regional economic disparities and increase competitiveness. Other primary objectives are to reduce the current account deficit and unemployment, increase the level of support instruments, promote clustering activities, and support investments to promote technology transfer.
Foreign firms are eligible for research and development (R&D) incentives if the R&D is conducted in Turkey.
Turkey is seeking to foster entrepreneurship and small and medium-sized enterprises (SMEs). Through the Small and Medium Enterprises Development Organization (KOSGEB), the Government of Turkey provides various incentives for innovative ideas and cutting-edge technologies.
Turkey’s Scientific and Technological Research Council (TUBITAK) has special programs for entrepreneurs in the technology sector, and the Turkish Technology Development Foundation (TTGV) has programs that provide capital loans for R&D projects and/or cover R&D-related expenses.

More detailed information can be found at the Presidency of the Republic of Turkey Investment Office website.

Bilateral investment conventions signed by Türkiye

Turkey has signed several bilateral investment treaties (BITs). To see a list of participating countries, consult UNCTAD website.