Turkey to achieve sustainable growth with new incentive package

The long-awaited incentive package was unveiled last week by Prime Minister Recep Tayyip Erdoğan. It will implement policies to attract new investments to 15 of the country’s relatively less-developed eastern provinces. Expected to substantially help reduce Turkey’s current account deficit (CAD) while minimizing differences in regional development with some large investments, the new incentive package is the most comprehensive announced so far. It is also anticipated that the package, which makes improvements in investment environment, will boost foreign direct investment (FDI).

Former Republican People’s Party (CHP) deputy Professor Esfender Korkmaz spoke highly of the new incentive package to Today’s Zaman, saying: “The package is perfect except for being late and not containing the rules of regulation. Some may be hesitant about the details of the package, thinking it will result in bureaucratic difficulties. However, with the introduction of the package, floating growth will disappear while enabling the country to enter the sustainable growth phase. Also it’s crucial for government to share the costs of risk with investors, which will attract businesses to all regions in Turkey and resolve the problems that stem from the gap in development between the regions.”

Noting the appeal of the incentive package for all kinds of investors, Bülent Gedikli, the Justice and Development Party (AK Party) deputy chair responsible for economic matters, explained that evaluations from many experts in past weeks show the package stands out for its flexible and dynamic structure. “Unlike previous incentive packages where payments were made to investors, the new package underlines the lessening of expenditures. Many occupation unions stated positive opinions on the package, finding it a versatile and a complementary package,” he added. Economist Zeki Şahin called the package, which targets large-scale development and will invest unused capital, the most detailed and comprehensive of the republic’s history. Explaining that new factories and large-scale farms will be established with the aim of increasing agricultural production as well as the industrial production driven by the agricultural goods produced, he commented, “I think there will be a massive investment campaign.” He noted with the investment boom, there will be huge loan demand from banks but that banks have the resources to meet the demand, saying, “Banks will be competing with each other to lend money and use their capital. However, I don’t think there will be an increase in interest rates: Instead, they will try to lower the rate to attract more customers.”

“In addition, Turkey will benefit from the investments it makes in its people by providing training lessons in vocational schools to increase the quality of labor in certain occupations. These people were waiting for jobs so as a result of the incentive package, the increase of demand for skilled labor will be matched by this supply of labor,” he stated.

FDI in Turkey reached $1.7 billion in two months

Economy Minister Zafer Çağlayan announced on Friday that FDI in Turkey has increased by 25 percent and reached $1.7 billion in the months of January and February.

Speaking to reporters, Çağlayan said that even in times of global economic slowdown in investments, Turkey has kept its “safe haven” status and the increased FDI flow to the country is proof of the continuation of interest in Turkey in 2012 as well. Recalling that FDI flow to country was $1.3 billion in the same period in 2011, he said the country continues to be an attractive place due to its strong performance. Noting that the source of 56 percent of the investments is European Union countries, he stated that the Netherlands leads the way with $385 million followed by Luxembourg with $144 million. 

“When looking at the distribution of FDI among sectors, the manufacturing industry received investments of $352 million. Within the manufacturing sector, the production of refined petroleum goods and cocking coal totaled $150 million and food and beverage production totaled $56 million. In the services sector, healthcare and social services ranked at the top with $273 million.”

In February 2012, 80 international firms began operations in Turkey in addition to 16 domestic firms that converged with foreign companies, totaling 96 new firms that started operations. Çağlayan also said, “As of the end of February 2012, there were a total of 29,579 firms with foreign capital,” and made the recommendation to foreign investors to take advantage of the new incentive package.