Members of Turkey’s International Investors Association (YASED) are planning for $7.1 billion (TL 185.65 billion) of direct investment in the country in the next six months, a top executive said.
Turkey attracted around $13 billion in foreign direct investment (FDI) in 2022, according to the Presidential Investment Office data, and officials have said it seeks to take a 1.5% share in global investments in the coming period.
There are other international companies that want to invest in Turkey, but the biggest issues are a lack of macroeconomic stability and regulatory unpredictability, YASED Chair Engin Aksoy said.
“Our desire is to ensure a predictable and stable environment, to ensure that investments are legally secure,” Aksoy noted. “The most important risk factor for Turkey is unpredictability.”
He said spiraling inflation and a volatile currency compound the negative perspective on the country.
Turkey has changed course since President Recep Tayyip Erdoğan was reelected on May 28, overhauling policies after two years of monetary easing to boost growth, production, exports, investment and jobs.
A reshuffle in economy management since the vote saw an appointment of Mehmet Şimşek, the respected veteran policymaker, as treasury and finance minister and Hafize Gaye Erkan, a former Wall Street banker, as central bank governor.
Coupled with other multiple steps, these were seen as initial signs Ankara would revamp policies centered on monetary stimulus and opt for interest rate hikes to combat stubborn inflation, stabilize the volatility in the Turkish lira and rebuild foreign exchange reserves.
Since then, the central bank has hiked its policy rate to 15% from 8.5% and pledged further tightening to fight inflation, which lastly eased to 38.2% in June, while the government has introduced tax and fee hikes to ramp up budget income.
“Macroeconomic stability and predictability in the regulatory framework will increase the appetite for Turkey,” said Aksoy.
“International direct investments did not stop due to the election process, but if there was predictability, there could have been much more investment,” he added.
To fund the recovery from major earthquakes that struck the country in February, Turkey last week presented a draft law that raises corporate tax to 25% from the current 20%, while corporate tax for banks and financial institutions will rise to 30% from 25% currently.
The earthquakes in southern Turkey killed over 50,000 people and left millions homeless. Business groups, economists and the government have said rebuilding could cost more than $100 billion.
Aksoy emphasized that they believe it is critical that the recent tax increase-style arrangements are made by consulting with nongovernmental organizations (NGOs) and the private sector and ensuring the necessary adaptation process.
“The trend in the world is the reduction of corporate tax; the opposite situation has happened due to the impact of the earthquake disaster in Turkey; we hope the increase will be temporary,” he noted, Daily Sabah reports.
