Foreign Direct Investment in Turkey

Turkey is often referred to as a typical middle income developing country. This judgement is based on the level of her per capita income, growth rate, population size and literacy rate which all lie near to the average for the middle income developing countries as a group. Turkey, however, differs markedly from other middle income developing countries in the relatively low volume of foreign direct investment (FDI) she harbours. Turkey is not idealogically hostile to the participation of foreign capital and enterprise in her economy. Indeed, one of the major objectives of the economic liberalization programme Turkey embarked upon in 1980 is the encouragement of inflows of FDI and workers’ remittances. Both for reasons of balance of payments, which in fact provided the impetus for the liberalization programme, and requirements of technology and know-how, FDI is crucial for the development of the Turkish economy. There are signs that foreign investors have responded to the liberalization policies, and inflows of FDI into Turkey have increased in recent years. It is, however, arguable if Turkey is poised to be a major recipient of FDI in the near future. Although, since the beginning of this decade, the world supply of FDI has increased appreciably and several countries including Japan have joined the ranks of suonliers of FDI, demand for FDI has also increased.