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Political, Economy and Foreign Direct Investment in Turkey

Globalization is that unavoidable phenomenon in which the world has been brought together as a global village through information, technology, culture and exchange of goods.This improvement of technology in transportation, telecommunication and the movement of people and capital, has improved people’s lives. Emergence of transnational corporations has encouraged the sourcing of workers globally leading to access of new markets across the world. Globalization has both benefits and disadvantages. The disadvantages include a drift towards a more homogenized culture and loss of employment. While the benefits are; increase in the variety of goods available to the world market and prosperity brought about by investments.

This essay looks at the political, economic and foreign investment in Turkey which has greatly been influenced by globalization. Direct investment in Turkey has become increasingly aggressive due to the Turkish government stand.The Turkish government considers investment as a way in which the economy can grow and be able to compete on a global platform. Turkey acts as a bridge between the European Union and the middle East. In the mid-nineties, foreign investment was regarded suspiciously due to the magnitude of the Ottoman Debt that existed at that time. There were both public and private debates about the issue and Foreign Direct Investment was looked at in a normative way. Foreign investment was initially discouraged through the enactment of Law 6224, which was designed as a liberal law. During this period, very minimal Foreign Direct Investment made its way into Turkey. As compared to other developing countries,the FDI to Turkey was fairly insignificant.

In modern times turkey has becomes a favorable nation in which Transnational Corporations has opted to invest in due to a number of factors, which are divided into; Supply factors, which mainly include labor skills and costs.

Demand factors such as demand and market growth and size geographical.Turkey offers the specific location advantages that these transnational corporations look for.Turkey has four locational advantageous factors which are elaborated below.

The geographical location of Turkey is an obvious advantage .Turkey is located between Asia and Europe enabling access to a wide range of markets. Turkey is well connected to Europe and is advanced in telecommunication and infrastructure development. Turkey’s participation in the Black Sea Economic Co-operation Organization and its trade Union agreements with the European Union has gone a long way to encourage strong trade relations with developed economies.

The economics of Turkey is also a key factor that has encouraged FDI in that country. Turkey has proven that it is an emerging economy and is aiming to become a financial center for the region. Turkey’s export and import markets are increasing and turkey’s domestic market is supported by the population of which half are below the age of 30 years. The cost of labor is low and provides a good market for materials. A good consumer market potential is expected as per capita income increases. The privatization program that has been initiated since the mid-1980s has provided around 40 billion dollars to investors. Estimates show that the government expects to realize nearly 5.5 billion dollars from privatization in the first quarter therefore the government has had the need to encourage foreign investment.

The political environment also plays an important role in investment. Turkey is has a fairly stable political environment conducive for the open market economy to thrive. Turkey has a modern democracy and is a liberal republic. The country has tightened its international relations through membership in a variety of international organizations including the United Nations, IMF, World Bank and NATO.

The Legal environment: These are measures taken by the Turkey environment to encourage foreign investment by providing incentives for registering companies and getting permits needed to operate in Turkey.

Education has played a big role in economic development. Education contributes to FDI in terms of skilled labor quality. FDIs inflows affect Turkey’s education. Government promotes foreign investors in exchange for the investors to support educational projects.

Other measures include the Turkish currency, that allows for 100 percent foreign ownership, 100 percent receipt of profit and dividends, foreign management,lowered tariffs and trade barriers ,removal of price controls and compliance with the legal international principles. Turkey offers investment incentives to investors who are willing to invest from fund and custom duties exemption; subsidizing the credit facilities and allocation land to the investors. Special priority has been accorded to trade free zones with the establishment of the Free Trade Zones Law No. 318.

There are also factors that limit inflow of FDI .They include foreign exchange problem, economic and political instability, the lack of a single coordinated department dealing with FDI,red tape,the attitude of SPO toward foreign firms together are reasonable in understanding the inadequacies of FDIs into Turkey. The Turkish government bargaining policies also hindered the inflow of FDIs. The demands of the Turkish government were impossible to meet and they were at times considered irrational by most of the foreign firms that wanted to invest in Turkey.

There have been different effects of FDI in Turkey.FDIs have contributed to the economic growth in Turkey. Increase in the rate of production of goods and services have been an effect of FDI. There has been a both direct and indirect positive change on economic growth as a result of Direct investment in technology and trade. Balance of payment in Turkey is affected circumstantially in that FDI utilizes and supports country export development.

Political environment has also been affected by FDI .In Turkey big Transnational companies with big capital or labor force, have made several claims mainly before the election that they would prefer a political party that is stable because they worry about the economic future of turkey. These speeches by big companies are made available in newspapers in the pre-election period. These speeches are mixed in politics to reduce the risk of political instability and attempt to encourage the people to vote for the more stable party, which protects the economic interests and advantages.


In conclusion, Foreign Direct Investment in Turkey has been on the rise due to the Turkish government taking strides in encouraging foreign investments and the rise of Turkey as a competitive economy has been a contributing factor. A number of factors such as the geographic location of turkey, its legal, political and economic environment are also other factors that make Turkey attractive to investors. FDIs have had different effects in certain sectors such education, the economy in terms of bop balance, occupation and foreign exchange. Several factors hinder direct-foreign investment in Turkey. These include irrational demands by the Turkish government. The Turkish government has made strides in encouraging investments and in the near future, the economy of Turkey might be ranked on a global scale.