Source: Privatization Administration

In 2010, Turkey attracted $8.760 billion in foreign direct investment, including $2.500 billion in real estate investment, the Central Bank of Turkey and the Real Estate Developers’ Associaition reported. The country pulled in a record $21.873 billion in foreign direct investment in 2007. In 2006, the nation attracted a $20.1 billion in foreign direct investment (FDI), twice the amount of foreign investment that entered the nation in 2005 and 79 times more than the amount of investment that the country absorbed from 1954 to 1980. Turkey in 2009 ranked 32^nd in the world and 17^th among emerging economies in attracting FDI, the United Nations Conference on Trade and Development said in its World Investment Report 2010.

About 70% of the FDI has been in mergers and acquisitions and the remaining has been in greenfield investments.

“Turkey has the potential of attracting five percent of its GNP -- around $25 billion -- in foreign investment every year,” Mustafa Alper, former secretary general of the International Investors Association of Turkey (YASED), declared in an interview.

Year	Amount
1980	35
1981	141
1982	103
1983	87
1984	113
1985	99
1986	125
1987	115
1988	354
1989	663
1990	684
1991	907
1992	911
1993	746
1994	636
1995	934
1996	914
1997	852
1998	953
1999	813
2000	1,707
2001	3,288
2002	1,042
2003	1,694*
2004	2,733*
2005	9,650*
2006	21.100*
2007	21.873*
2008	14.442*
2009	7.597*
2010	8.760
Total	131,772**

Turkish authorities are approaching FDI without discriminating about the sector or origin, but give special attention to investments that will bring new jobs, know-how and generate value-added to the economy. Investments in information and communications technology, machine tools, machinery, metal processing, logistics and automotive industry, food processing, pharmaceuticals, energy, services and infrastructure are being particularly encouraged.

Consumer-oriented service companies are pouring into the country, mesmerized by the country’s young population and rapidly changing shopping habits.

“Turkey presents its compatibility with global business environment, but the country is also receiving more and more greenfield investments in different sectors,” Alpaslan Korkmaz, former chairman of the Investment Support and Promotion Agency of Turkey (İSPAT), said in an interview with the magazine Foreign Direct Investment (FDI). “The expansion of already installed companies (as in the automotive industry, household appliances, etc) presents also an important domain for Turkey’s economy. We are enjoying seeing that those investors strongly believe in the future of Turkey and its competitive advantages.”

Some 3,500 Turkish companies have invested a total $23.6 billion in 103 countries by October 2010, the Central Bank of Turkey reported in January 2011.

The biggest investment areas of Turkish companies abroad are in energy, banking, financial services, chemical products, airport operations and textiles, officials said.

Major Turkish investors abroad include synthetic fibers manufacturer Advansa Sasa, tire fabric and industrial yarns producer Kordsa Global, commercial vehicles manufacturer Temsa Global, the Turkish Petroleum Corporation (TPAO), TAV Holding, mobile phone services company Turkcell, glass manufacturer Şişecam, Çalik Holding, media group Doğan Holding, banks İşbank, Ziraat Bankası and Garanti Bankası, Enka Holding, Eroğlu Holding, Koç Holding, Tekfen Holding, Çelebi Holding, Alarko Holding, Yıldız Holding, Doğuş Holding, the Borusan Group, Fiba Holding, and Gübretaş.

One of the biggest Turkish investments abroad is TAV Holding’s operations of the $550 million Enfida International Airport in Tunisia constructed on a build-operate-transfer basis. TAV will operate the airport, which opened at the end of 2009, for 40 years, and the facility is expected eventually to receive 22 million foreign travelers a year, as Tunisia enters the big leagues in world tourism. TAV Holding also operates the newly renewd Monastir Habib Bourguiba International Airport, which it renovated, under a 40-year contract with the Tunisian government.

Turkey’s top 19 non-financial multinationals held more than $31 billion in foreign assets as of December 2009, according to a study carried out jointly by Kadir Has University (KHU), KPMG Turkey, the Foreign Economic Relations Board of Turkey (DEİK) and Vale Columbia Center on Sustainable International Investment (VCC). The foreign sales of these companies in 2009 stood at $14.725 billion. They employed 89,946 persons abroad.

In 2010, Turkey had 203 cases of mergers and acquisitions (M&A), totaling $29 billion, up five-fold from 2009, the consultancy company Deloitte Turkey said in a report published in January 2011.

Deloitte Turkey said 35 transactions worth $14.6 billion involved the privatization of state enterprises, though many of these are still awaiting approval from competition authorities, court rulings and financing to be finalized. Twenty-four cases of M&As totalling $850 million were carried out by private foreign equity funds.

The biggest single case of an M&A in 2010 was Spain’s Banco Bilbao Viscaya Argentaria’s (BBVA’s) acquisition of a 24.89% of Garanti Bankası from GE Money and Turkey’s Doğuş Group for a total $5.76 billion. The deal was concluded in the first quarter of 2011.

The M&A transactions were concentrated in energy, health and medical services, pharmaceuticals and retailing. The average transaction was $50 million, an indication that small andmedium-sized companies dominated the deals.

3.4 CANADIAN PENSION FUNDS INVEST IN TURKEY

In February 2007, Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, and the Canada Pension Plan Investment Board jointly established Actera Partners, the largest private equity fund to date exclusively focused on investment opportunities in Turkey. The aim is to capitalize on the opportunities created by Turkey's emerging economic potential and its continued drive to modernize its financial and regulatory structures.

Actera Partners' investment strategy focuses primarily on buyout and growth equity investments as well as seeking to partner with Turkish companies in order to assist in their expansion efforts outside of Turkey. The fund had raised $450 million by March 2008, and its first major investment in Turkey was the acquisition of a minority stake in Mey İçki, a privatized alcholic beverages producer.

Jim Leech, Senior Vice-President of Teachers' Private Capital, said: "Turkey is an attractive private equity market, with a large and growing population, a high number of quality mid-market businesses, and a developing economy which is expected to benefit from becoming increasingly harmonized with Europe.”

In March 2008, the Canadian Pension Plan Investment Board Real Estate Holdings took a 26.53% share in the Multi Turkey Retail Fund in partnership with Multi Corp BV of Holland.

The Canadian Plan provided €250 million to the fund, which is a development company that consists of 21 completed, under construction or planned shopping centers in Turkey with a projected value opon completeion of over euro 4 billion. The fund is financed through a combination of equity and bank loans.

An associate member of the European Union (EU), Turkey began accession talks with the world’s biggest trade bloc on October 3, 2005. Turkey also forged a customs union with the Union, when it removed all trade barriers in 1996 against industrial goods produced in the 27-nation emporium in return for the lifting of all quotas against Turkish textiles. It also enacted laws to protect copyrights, patents and brands and other intellectual property rights and adopted the lower tariff system of the Union against industrial products from third countries. About 46% of its exports went to the European Union and about 39% of its imports came from the 27-state emporium in 2010.

But membership talks have moved forward at a snail’s pace because of differences between Turkey and the Union over Cyprus and human rights and inertia on part of both sides.

Nevertheless, Turkey took an immense step with the creation of a new EU Ministry and the appointment of Egemen Bağış, a close associate of Prime Minister Recep Tayyip Erdoğan, as minister.

Negotiations on only one chapter of 35 chapters, or policy areas -- science and research -- was begun and provisionally completed in June 2006.

Negotiations on 13 other chapters have opened since 2005. These are company law; intellectual property law; financial services; information,society and media; taxation; economic and monetary policy; statistics; enterprise and industrial policy; Trans European networks; environment; consumer and health protection; financial control; and food safety and veterinary and phytosanitary (plant health) policy, free movement of capital.

A screening process has been completed on 33 chapters.

The nation must complete reforms for negotiations to begin in seven other chapters, including public procurement; competition policy; social policy and employment; economic and monetary policy; regional policy and coordination of structural instruments; financial and budgetary provisions; institutions; and other issues.

Eight chapters have been blocked since the end of 2006 because of Turkey’s refusal to open its ports and airports to cargo ships and commercial aircraft of EU member Greek Cyprus. These issues are: free of movement goods; right of establishment for companies to provide services; financial services; agricultural and rural development; fisheries; transport policy; customs union: and external policy.

Turkey in return demanded that the Greek Cypriots open it ports to Turkish Cypriot ships and airplanes and urged the Union to end its 34-year embargo against the Turkish Republic of Northern Cyprus. Turkey refuses to recognize the Greek Cypriot administration in the southern part of the island as the sole government of Cyprus.

Cyprus has been divided territorially since Turkey sent troops to the Mediterranean island in June 1974 to protect the Turkish Cypriot minority in wake of a coup against the Cypriot government, engineered by the junta then ruling Athens and aimed at uniting the island with Greece.

Negotiations on six other chapters, including freedom of movement of workers; energy; justice, freedom and society; judicial and fundamental rights; education and culture; and foreign security and defense policy, were frozen at the end of 2009 over disputes on several matters.

Relations took a turn for the worse in July 2011, when Foreign Minister Ahmet Davutoğlu warned Brussels that ties between Turkey and the trade bloc would be frozen if the Greek Cypriot Administration were allowed to become the new term president of the European Union.

Despite the obstacles, the European Union is providing €1.681 billion in aid to Turkey in the form of grants between 2011 and 2012. But large-scale EU funding for Turkey’s huge agricultural sector and economically underdeveloped eastern parts of the country isn’t forthcoming until Turkey itself carries out massive rural reforms.

Nevertheless, the European Investment Bank provided an estimated €14 3 billion in loans to Turkey from 2004 to 2011, including financing of a natural gas pipeline from Turkey to Greece to carry energy supplies from the Caspian region to Western Europe, and credits to small and mid-scale Turkish companies. It also provided €700 million for a high-speed train that will run from İstanbul to Ankara.

Additionally, some 370 projects of Turkish universities, industries and government organizations were designated to receive substantial grants through of the EU’s Seventh Research Framework Program (2007-2013). The projects cover research in the fields of health, energy, food and agriculture, biotechnology, environment, climate change, transport, space and security, nanotechnology, social and economic sciences, competition and innovation and information and communication technology.

Furthermore, thousands of Turkish university students and lecturers have received EU-funded scholarships and fellowships to study and teach at universities in member countries of the trade bloc. In the 2008-2009 school year alone, some 7,810 Turkish students took part in the EU-funded Erasmus university exchange programs and 2,661 students from the member countries studied in Turkey. Turkish companies are also allowed to bid for contracts in the EU.

Accession talks have also resulted in a stampede of European, American, Japanese and Arab investment into Turkey’s banking, insurance sectors and brokerage services and a flurry of mergers and acquisitions in the fields of energy, health services, telecommunications, building materials, real estate development and other industries and services. The appetite for Turkish investments continues today, despite a tightening up of global liquidity.