Why invest in Turkey?
Turkish economy is in strong growth and strong financial institutions such as HSBC, Financial Times & Goldman Sachs identified Turkey as one of the most promising 4 countries of the world for investors. Most of the investors from outside are focusing only for real estate. But Turkey is offering many investment opportunities for investors in different sectors.
What makes Turkey a good investment country?
The risk-reward ratio of investing in Turkey at the moment is possibly one of the highest in the world and it’s one of the safest houses in the neighbourhood. Turkey is rewarding investors with growth spurred by a young and educated workforce, modern infrastructure, a large domestic market, multiple free trade agreements and a liberal and reformist investment climate along with a decent financial system and corporate governance.
What is the financial performance of Turkey?
The Turkish economy rebounded from a severe crisis in 2000-2001 to emerge as the fastest-growing economy among the OECD countries and second fastest among G-20 countries, with a growth rate of 9% in 2010 and 8.5% in 2011. It is on track to become the leading OECD economy through 2017, with annual growth set to average 6.7%.
How much foreign investment is there in Turkey?
Direct international investment hit $17.6 billion in 2015, a 75.7% jump from 2015. Turkey is a destination for wealthy Middle East investors, thanks to its stable government, good demographics, access to many interesting and well diversified markets, a decent financial system and corporate governance.
So, let’s check some sectors which offers profitable business for investors:
Some Investment Opportunities in Turkey
Turkish Government and EU has mutual support and incentives in many cities in Turkey to support rural development with investments and business. The main support and incentive programme is called IPARD. The IPARD supports these kind of investments in Turkey. First of all, lt’s check what type of investments are supported and which cities are in the support programme.
There are other incentive packages offered by the Ministry of Economy for manufacturing investments. To make a manufacturing investments in Turkey, we can analyse and the investment type and discuss with officers to find the best incentive programme to apply. Turkish Republic Ministry of Economy incentive packages are mostly more suitable for manufacturing investments.
They offer also supportive investment capital return and taxation advantages for a limited time include all income taxations, machine buying taxations, insurance taxations for workers and staff. Fort his occasion, before the investment, it is beter to discuss and find out fort he best incentive packages for investors.
Summary of Turkish Food & Agriculture Industry
Home to the headwaters of the Tigris and Euphrates Rivers, Turkey’s agricultural sector today is echoing the prosperity of ancient Mesopotamia. With its favorable geographical conditions and climate, large arable lands, and abundant water supplies, Turkey is considered to be one of the leading countries in the world in the field of agriculture and food.
Turkey has a robust agriculture and food industry that employs almost 20 percent of the country’s working population and accounts for 6.1 percent of the country’s GDP in 2016. The sector’s financial contribution to the overall GDP increased 40 percent from 2002 to 2016, reaching USD 52.3 billion in 2016. The strengths of the industry include the size of the market in relation to the country’s young population, a dynamic private sector economy, substantial tourism income and a favorable climate.
Turkey is the world’s 7th largest agricultural producer overall, and is the world leader in the production of dried figs, hazelnuts, sultanas/raisins, and dried apricots. The country is also one of the leading honey producers in the world. Turkey boasted production of 18.5 million tons of milk in 2016, making it the leading milk and dairy producer in its region. The country also saw production totals of 35.3 million tons of cereal crops, 30.3 million tons of vegetables, 18.9 million tons of fruit, 1.9 million tons of poultry, and 1.2 million tons of red meat. In addition, Turkey has an estimated total of 11,000 plant species, whereas the total number of species in Europe is 11,500.
This bountiful production allows Turkey to maintain a significantly positive trade balance thanks to its position as one of the largest exporters of agricultural products in the Eastern Europe, Middle East, and North Africa (EMENA) region. Globally, Turkey exported 1,781 kinds of agricultural products to more than 190 countries in 2016, accounting for an export volume of USD 16.9 billion.
Turkey is looking to position itself as the preferred option for being the regional headquarters and supply center of top global players in the agricultural sector. To encourage investment in the sector, Turkey offers a set of incentives for potential agribusiness investors.
According to McKinsey and Co., Turkey offers significant investment opportunities in agribusiness subsectors such as fruit and vegetable processing, animal feed, livestock, poultry, dairy, functional food, fisheries, and enablers (in particular cold chain distribution, greenhouses, irrigation, and fertilizer).
As part of its targets set for the agriculture sector by 2023 Turkey aims to be among the top five overall producers globally. Turkey’s vision for its centenary in 2023 includes other ambitious goals, such as:
- USD 150 billion gross agricultural domestic product
- USD 40 billion agricultural exports
- 8.5 million hectare irrigable area (from 5.4 million)
- Ranking number one in fisheries as compared with the EU
Turkey is offering unique opportunities for e-commerce and e-trade investors. Turkish population is one of the highest population in EU as 80 million total and half of the population is under 35 age. All the young population is using and buying through online and mobile. Standing in front of these numbers, Turkish e-commerce and mobile trading sectors are growing very fastly.
Summary of E-commerce Market in Turkey
Researches show that there is 14 billion TL market for e-commerce sector. Within 7,3 billion TL of retail sector size, e-commerce has only 1,3% share. Comparing to the developed countries, there is a huge potential for the following years in terms of e-commerce business in Turkey.
Turkey’s Internet trade has increased by an average of 50 percent a year over the last three years, Customs and Trade Minister Bulent Tufenkci says. “The volume of the payments via bank cards for Internet shopping reached to 45 billion Turkish liras ($14.6 billion) in January to August of this year,” he told an e-Trade Sector Assembly Meeting held by the Union of Chambers and Commodity Exchanges of Turkey (TOBB).
Remarking on the contribution the online sector had made to global economic growth, Tufenkci said collaboration between the public and private sector was “essential to utilize opportunities.” However, online trading still only accounted for 2 percent of the retail sector, TOBB head Rifat Hisarciklioglu said.
“Online retail’s share is over 10 percent in the developed countries,” he added. “We can rapidly catch them as the figures of Internet penetration and smart phone possession in Turkey are similar to Western countries’ ratios.”
Considering the numbers, Turkey is openly welcome for new e-commerce iniatives and investments to increase the numbers. In this step, niche investments has more chances such as organic food, wearable technologies, consumer products…
The manufacturing industry is one of the main drivers of the Turkish economy, accounting for 24.2% of total GDP. According to Turkstat, Turkey’s manufacturing industry has been increasing at a CAGR of 12% since 2003, exceeding the growth levels of the gross domestic product and reached TL 220 billion in 2012.
The Turkish investment incentive program provides varying tax reductions between 15-65% depending on investment region and scale and social security support for 2 to 12 years depending on region.
Summary of Manufacturing Industry in Turkey
Turkey has shown robust macroeconomic growth in recent years thanks to the government’s growth program and is expected to show continuous growth. The Economist Intelligence Unit (EUI) expects an annual average growth rate in real GDP to be around 5% until 2017. Moreover, OECD forecasts a real GDP growth of 3.8% in 2014 and 4.1% in 2015.
Turkey’s has a young and extremely large workforce – 7.5 million people between the ages of 24 and 34 – with competitive wage rates of USD 572* per month as of October 2013. Students graduating from manufacturing-related departments in universities numbered over 32,000 in 2012, while there were more than 35,000 graduates from vocational training schools during the same period.
According to the Ministry of Economy, Turkey has Free Trade Agreements with 19 countries and has started negotiations with another 13 countries. There are also 19 free trade zones in Turkey which enable corporate, income and customs tax, VAT and RUSF exemptions, along with many other opportunities.
Turkey’s 2023 goals include reaching certain benchmarks for exports in various sub-sectors, including: machinery (USD 100 billion), chemicals (USD 50 billion), textiles (USD 20 billion), automotive industry (USD 75 billion), and electronics (USD 45 billion).
Turkey is offering unique opportunity for high technoogy manufacturing investments. As a geographical advantages and workforce population and educated young population, Turkey is one of the most promising country for manufacturing investments with the advantages of many conditions.
Turkey stands as a very promising region for miners and explorers as the least explored portion of Tethyan Metallogenic Belt. Tethyan belt is one spesific kind of ophiolite extending from the western Mediterranean via the Alps to southeastern Europe, through Turkey, the Lesser Caucasus, Iran, and the Himalayas to China
With the recent regulatory improvement, Turkey has become more attractive for mining investments. As the corporate tax rates and royalties show explicitly, Turkey is actually in a superior spot in taxation regime now.
Summary of Mining & Metal Industry
Turkey’s mining and metals sector has grown in parallel with the country’s robust economy. Harboring a large expanse of the western portion of the Tethyan-Eurasian Metallogenic Belt, which is an ophiolite extending from the Alps to southeastern Europe through Turkey, the Lesser Caucasus, Iran, and the Himalayas on to China, Turkey offers proven potential for mining investors. As the least exploited portion of the belt, Turkey stands out as a very promising region for companies engaged in mineral extraction. Mining in Turkey has mainly been limited to surface excavations, meaning huge potential with deep drilling is awaiting international investors.
Here are some essential facts and figures about the Turkish mining and metals sector:
- The sector’s total production value soared to TRY 24.5 billion in 2015.
- Turkey’s young, dynamic, and well-educated labor force offers a high-quality labor pool.
- There are 53 mining engineering departments in 38 cities in Turkey. The number of mining engineers in Turkey has increased by more than 50 percent since 2005, now reaching almost 35,000. In 2016, around 1,200 new mining engineers were added to the talent pool.
- Turkey’s advantages for companies in the mining sector are not limited to a high-quality labor pool, but also include relatively low logistics and drilling costs, proximity to major markets, lucrative government incentives, and highly competitive taxes.
- As a result of its remarkable economic growth, years of political stability, structural reforms, and the backing of governmental bodies, Turkey attracted USD 149 million of FDI to its mining industry in 2015. Meanwhile, mining exports in the sector totaled USD 3.5 billion in 2016.
- These figures prove investors’ increased interest in Turkey. As of today Turkey hosts 790 international mining companies, up from only 138 in 2004.
Turkey’s regional investment incentive system is based on a descending pattern where regions vary in a range of 1 to 6 based on their level of development, with a rating of 6 being given to the least developed regions. With this system, the most advantageous incentives are offered to the lesser-developed regions. Mining is one exception to this scheme, as most investments in the mining sector are supported with incentives extended to Region 5, regardless of the investment’s location.
Turkey is the 17th largest economy in the world and 6th largest economy in Europe with a GDP of approximately USD 786 billion. The real estate sector in Turkey represents 19.5% of the total GDP and offers great investment potential.
Targets are being set and development also continues in urban renewal projects. The Turkish government has decided to renew and retrofit buildings that are prone to destruction during natural disasters including 6.5 million residences with a budget of USD 400 billion.
Office construction licenses obtained throughout Turkey increased by 27% and reached 6.84 million sqm. Istanbul office stock grew at a CAGR of 10.6% from 2003 to 2012.
Turkey is one of the most promising real estate markets in Europe, and the mantra “location, location, location” rings especially true for this country. Strategically situated at the crossroads of Europe, the Middle East, and Central Asia, and home to almost 78 million people, Turkey offers great opportunities for real estate developers and investors by combining a large construction sector with growing commercial and industrial output.
Some key facts and figures in the Turkish real estate sector include:
- The real estate sector accounted for approximately 5 percent of GDP in the last decade. On the investment side, FDI inflow rose to USD 16.5 billion, with real estate and construction garnering USD 4.1 billion (24.8 percent) of total FDI in 2015.
- Urban renewal and mega projects dominate the agenda for the foreseeable future, particularly in Istanbul. Some projects in the city include the Marmaray, Canal Istanbul, the third Bosphorus Bridge, and Istanbul’s third airport.
- It is estimated that around 6.7 million residential units nationwide will be demolished and rebuilt over the next 20 years, meaning an average of 334,000 units per year. Around USD 15 billion of financing will be required each year for urban renewal projects. In total, a budget of USD 400 billion has been allocated for this initiative, with the private sector taking the lead role.
- According to the Knight Frank Global House Price Index, Turkey ranked first in the 55-location index in Q4 of 2015 in terms of annual price growth index. Turkey saw a year-on-year increase of 18.4 percent and thus emerged as the top-performing housing market in the world, ahead of New Zealand, Sweden, and Australia.
- The total number of houses sold in the Turkish property market reached 1,289,320 units in 2015; likewise sales of real estate to foreigners began to increase following the abolishment of the reciprocity law in 2012. In 2015, 22,830 houses were sold to foreigners in Turkey, marking a year-on-year increase of 20.4 percent. With regard to house sales to foreigners, Istanbul was the top-performing province with 7,493 sales in 2015, followed by Antalya with 6,072 sales, Bursa with 1,501 sales, and Yalova with 1,425 sales.
- Office construction licenses obtained throughout Turkey increased by 27 percent, and together totaled 7 million square meters of additional planned office space in 2013. Class-A office space supply is expected to reach 6.5 million square meters by the end of 2017 with the completion of projects such as the Istanbul Finance Center, which, according to projections, will provide employment for 30,000 people.
- 368 shopping centers are operational in Turkey with a total gross leasable area of 10.89 million square meters. 108 shopping centers in Istanbul with a total gross leasable area of 4 million square meters represent 37 percent of the total leasable shopping center area in Turkey.
- According to JLL’s Cross Border Retailer Attractiveness Index 2015, Istanbul is the 7th most attractive market in Europe after London, Paris, Moscow, Milan, Madrid and Rome.
- In spite of the growth in recent years, Turkey is still below the average of total leasable area per person compared to the European average. This indicates potential for further retail growth in Turkey.
- By the end of 2015, there were 13,615 registered accommodation facilities. 9,188 of these facilities were licensed by their respective municipalities, while the remaining 4,427 held tourism operation licenses. The combined total bed capacity of these facilities exceeds 1,250,000, although there is still a gap between supply and demand, particularly in Istanbul.
- There are currently 281 projects in the pipeline that would add 74,130 much-needed beds to Turkey’s short supply.