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Foreign investors around the world are apprehensive about the possibility of a new financial crisis in the international market. How do you respond to this sensitivity, and in what ways does the Turkish market hedge against such risk?

The Turkish financial markets have been very resilient to the recent global financial crisis. Not even a single bank was bailed out by the government during the crisis. On the contrary, the Turkish financial sector has witnessed real growth in 2009, when many economies contracted and hundreds of banks were bailed out in major economies. For example, the banking sector in Turkey increased its profit by 50% in 2009 when the crisis hit all economies across the world hard. Moreover, Turkey has been the only OECD country that did not have to introduce financial relief packages in order to mitigate the negative impact of the crisis. That being said, we are well aware of a possible new financial crisis, but as Turkey has a very strong regulatory and supervisory financial structure, both the government and independent authorities, such as the Central Bank and the Banking Regulation and Supervision Agency (BRSA), are closely following the developments in the global financial markets as well as in the domestic market and accordingly taking measures against future risks. So far their policies and measures have proved prudent and right.

How has the new Turkish Commercial Code changed the foreign investment landscape?

The new Turkish Commercial Code has overhauled the whole business legislation together with the new Obligation Code. First of all, the new Commercial Code brings Turkey’s business legislation in line with international standards, in particular with EU standards and legislation. For example, the new law aims to incorporate internationally accepted accounting standards into domestic legislation, increase the transparency of enterprises, and prevent unfair competition. Introducing the use of ICT in the business world, the new law makes it easier for investors to run their business in Turkey even from their home countries. Similarly, the new code makes it easier for investors to establish a new company in Turkey.

A number of leading multinationals have chosen Istanbul as a regional headquarters. What are Turkey’s comparative strengths as a regional base of operations?

Turkey’s growing domestic market together with the potential markets in the neighboring region make Turkey an ideal place for investment, because from Turkey you can easily access markets in the Middle East, North Africa, Caucasus, and Central Asian republics. That is why many global companies are taking advantage of this strategic location by relocating their regional headquarters to Turkey. For example, Coca-Cola is managing 94 countries from its headquarters in Istanbul; similarly Microsoft is managing 80 countries. In addition to the strategic location, the skilled labor force as well as the availability of component senior managers in Turkey attract multinational companies to move their regional headquarters to Turkey. Besides being a hub for managerial operations of global companies, Turkey is also developing into a manufacturing base for global investors. With its competitive business environment and skilled labor force Turkey offers many advantages for global manufacturing companies. Global manufacturing companies are well aware of the unique advantages of Turkey. For example, Foxconn, the global IT giant that manufactures computers for HP, has recently inaugurated a manufacturing facility in Turkey. Foxconn is going to produce more than 2 million computers for HP in Turkey to export to the markets in the Middle East, North Africa, and other markets in the region.

What current or projected incentive schemes would you like to highlight?

Turkey offers quite generous incentives for investors. What is most striking with the current investment schemes is the fact that investors are provided with a wide range of incentive packages. For example, if you are an investor interested in R&D, then you can benefit from the incentive package that is exclusively prepared for R&D and innovation activities. That is why various global companies have recently announced investment projects in R&D and innovation by establishing their R&D centers in Turkey. For example, Roche, Pfizer, Fiat, Mercedes-Benz, Huawei, General Mobile, Bosch, Siemens, GE, Oracle, Intel, Alcatel-Lucent, Microsoft, ST Ericsson, and Nortel; they all have invested in a growing Turkey. Other incentive schemes have been introduced to attract investors with diverse backgrounds. Region-based incentive schemes offer very favorable conditions for investors, while a large-scale based incentive package provides investors with incentives regardless of the region in which they invest. To put it in a nutshell, investors have a wide range options to realize their investments benefitting from various incentive schemes.

In which sectors are you seeing the most investor interest, and which sectors do you feel represent the greatest untapped potential?

Investors are interested in many promising sectors ranging from finance to energy. Plenty of opportunities are available in automotive, ICT, energy, renewable energy, pharmaceutical, agro-food, petrochemicals, and so on. To begin with, energy is a very important sector for several reasons, first, in order to meet Turkey’s growing demand for energy, more than $100 billion worth investment is required. The economy is growing rapidly, and by the same token, energy demand is growing in parallel with economic growth. Secondly, Turkey’s geostrategic position makes it a key energy corridor and terminal, as around 70% of global energy resources are located in the south and the east of Turkey, while the largest consumer, Europe, is located to the west of Turkey. Thirdly, renewable energy is a rising sector in Turkey, as the country’s renewable resources are yet to be fully utilized. Moreover, the government is committed to increasing the share of renewable energy in energy generation, and to this end a new renewable energy law has been introduced, providing investors with incentives and feed-in tariffs.

Further privatization and developments in the energy sector will also create quite profitable opportunities for global investors. Global investors also have the opportunity to cooperate with the public sector through public private partnership (PPP) projects. The national and local authorities have been implementing numerous investment projects through PPP, ample opportunities are awaiting global investors in education, energy, defense, health, transportation, and other public services provided by local governments. Another exciting area of investment is finance; as you may know Istanbul is developing into an international financial center. The government launched the project, “Istanbul Finance Center”, to make Istanbul a regional financial center from where global companies could manage their financial operations in the region.

Which source countries are the most active in Turkey, and do you anticipate significant changes in Turkey’s investor base?

Investors from the EU still constitute the bulk of foreign direct investment (FDI) in Turkey—around 70% of FDI inflows come from the EU. Such a solid fact suggests that European investors have already admitted Turkey into the EU business architecture, while politicians are lagging behind them. US investors are also very active in Turkey, as at country level, US investors are at the top of the FDI tables in Turkey. Nevertheless, we are seeing a growing interest by investors from the Arab Peninsula, which have realized multi-billion worth investment projects in Turkey in recent years.

How does ISPAT facilitate the activities of foreign investors?

The Agency, which was established in 2006, offers global investors a wide range of services. Since its foundation, ISPAT has been providing assistance to investors before, during, and after their entry into Turkey. It serves as a reference and contact point for international investors by linking them with both the government and businesses in Turkey. Working on a fully confidential basis and acting like a private venture, the Agency is trustworthy and adaptable. ISPAT’s free services include, but are not limited to, providing market information and analyses, site selection, B2B meetings, coordination with relevant governmental institutions, facilitating legal procedures and applications, such as establishing business operations, incentive applications, and obtaining licenses and work and residence permits. Being attached to the Prime Ministry and directly reporting to the Prime Minister provides the Agency with operational freedom and flexibility. Similarly, coordination and cooperation with all governmental organizations enables ISPAT to facilitate investment processes promptly and effectively. Since its establishment, the Agency has carried out global campaigns to raise awareness about investment opportunities in Turkey. Having successfully implemented these campaigns, the Agency is now focusing on specific countries, sectors, and in some cases specific companies in order to get concrete results. In this regard, we see investors as clients and client satisfaction is a top priority for us.

What is your forecast for the Turkish economy?

Well, predictions are difficult to make, but when it comes to Turkey, it is very easy to make predictions confidently. Let me elaborate a little bit; as you may already know, the Turkish economy has shown remarkable performance with its steady growth over the past eight years. A sound macroeconomic strategy in combination with prudent fiscal policies and major structural reforms in effect since 2002 have integrated the Turkish economy into the globalized world, while transforming the country into one of the major recipients of FDI in its region, attracting around $94 billion in the past eight years. With an average annual growth rate of approximately 5% over the past eight years, Turkey has been the fastest growing economy in the region. Turkey’s robust economic performance in 2010 has sealed its success in gold stars, growing by 8.9%. Turkey was the fastest growing economy in Europe and was among the top performers in the OECD in 2010. Turkey’s strong economic growth has continued beyond that, which accelerated to 11% in the first quarter of 2011, thus standing out as the fastest growing economy in the world. Now that we have such a strong economic background, we can easily make predictions about Turkey that promise confidence and growth. That is why credible international institutions are so confident about Turkey’s economic future. The OECD forecasts that the Turkish economy will grow by an impressive average annual growth rate 6.7% between 2011 and 2017. Similarly, Goldman Sachs has projected that Turkey will emerge as the ninth largest economy in the world and third largest economy in Europe by 2050.