WHY INVEST IN TURKEY?

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Ruth Neal
5 years ago
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2 Why invest in? 10 reasons to invest in.. Robust Economy Opportunities Domestic market + EU Benign R&D Ecosystem WHY Strategic Location INVEST IN Lucrative Incentives TURKEY? Favorable Demographics Business-friendly OPEN for BUSINESS REFORMS Skilled workforce with cost advantage Continuous reform process..

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Robust Economy Track record

. 13 TH LARGEST ECONOMY Ranking of Economies by GDP at PPP Average Annual GDP Growth (%), 2003-2017 Poland Romania Czechia

8 Real GDP Growth (Index: 2002=100) Fastest growing economy in G20 2017 Real GDP Growth in G20 2003 2017 2021 275 250 225 200 175

3 Robust Economy Track record growth and bright future with proven resilience.. 13 TH LARGEST ECONOMY Ranking of Economies by GDP at PPP Average Annual GDP Growth (%), Poland Romania Czechia Hungary Real GDP Growth (Index: 2002=100) Fastest growing economy in G Real GDP Growth in G China India Indonesia G20 Korea Canada Argentina EU France Germany Australia US Mexico Japan UK Russia Italy S. Africa Brazil S. Arabia -0.8% 3.8% 3.1% 3.0% 2.9% 2.4% 2.2% 2.2% 2.2% 2.2% 2.0% 1.7% 1.7% 1.5% 1.5% 1.3% 1.0% 5.1% 6.2% 6.8% 7.4% Source: TurkStat, OECD, World Bank, IMF, PPP: Purchasing Power Parity

4 Robust & Resilient Economy Strong macroeconomic fundamentals have been based on successful public finance management.. Gross Public Debt Stock as % of GDP Budget Balance as % of GDP EU EU Annual Inflation (%) CPI: 40% Average Volatility: 23% CPI: 71% Average Volatility: 18% YDT CPI: 9.6% Average Volatility: 4% Source: Eurostat, IMF, OECD, CBRT

5 Robust Economy Driven by a diversified structure, Turkish economy has more than tripled over the past 15 years Turkish economy has more than tripled over the past 15 years and is promising more growth in future Driven by a robust domestic market and entrepreneurial private sector which has spurred investments and exports Turkish Economy (GDP at current prices, $Billion) Contribution to GDP Growth (%) Domestic Consumption Investment Expenditures Exports -2 Stocks -25 Imports Source: TurkStat

6 Domestic Market s economic growth has paved the way for emergence of a sizeable middle-class with an increasing purchasing power Tripling Income per capita (GDP per capita, current prices) GDP per capita in countries with population over 50 million, 2017 Stock of Automobiles (millions of passenger cars) $3,581 $10, US (1) Germany (2) France (3) UK (4) Japan (5) Italy (6) Korea (7) Russia (8) (9) Brazil (10) $10,608 $10,597 $9,895 $31,984 $29,891 $44,550 $39,869 $39,735 $38,440 $59, million The Rise of Turkish Middle Class (# of individuals by annual disposable income per capita) High income (>$55K) Annual House Sales (million of houses) million Upper-middle ($25K $55K) 21.2 million 17.8 million 23 million Middle ($10K $25K) Low ($5K $10K) 40 million 10.8 million million Poor (<$5K) 3 million Source: IMF, Turkstat, Euromonitor, ICTA

7 Domestic Market The domestic market is further supported by emerging urban centers across More than 20 urban centers with populations over 1 million Source: TurkStat, 2017

Domestic Market + EU Domestic market + EU

with the to EU allows direct access to the EU

8 Domestic Market + EU Domestic market + EU market + Free Trade Area Customs Union Access with the to EU allows direct access to the EU Market 510 million in EU million in FTA Area in 27 countries with Free Trade Agreements + 81 million in Free Access to 945 million consumers Source: Eurostat, Population as of 2017, Ministry of Economy * In ratification process

Strategic Location to manufacture, export and manage

5 billion people and $24T GDP in Europe, MENA and Central

Airlines connects you to 255 destinations in 122

Exporting 85% of its production Exporting 77% of its

production facility worldwide AS WELL AS MANAGEMENT HUB

9 Strategic Location to manufacture, export and manage PROXIMITY TO MAJOR MARKETS 1.5 billion people and $24T GDP in Europe, MENA and Central Asia at 4 hour flight-distance CONNECTIVITY Turkish Airlines connects you to 255 destinations in 122 countries MANUFACTURING & EXPORT HUB FOR MULTINATIONALS Exporting 85% of its production Exporting 77% of its production Production base for MENA Its largest production facility worldwide AS WELL AS MANAGEMENT HUB FOR MULTINATIONALS 89 countries 80 countries 80 countries 72 countries 67 countries 63 countries 60 countries 30 countries

10 A g e G r o u p s ( % ) A g e G r o u p s ( % ) Favorable Demographics half of population under age 31.. TURKEY EUROPE Female Male Female Male Working Age Population (15-64) (Index: 2014=100) Total Dependency Ratio (%, Age 0-14 & 64)/Age 15-64) Europe Europe Source: Turkstat, Eurostat, UN, 2016

11 Germany France USA UK Slovakia Czechia Hungary Poland Romania Germany USA France UK Slovakia Poland Hungary Czechia Romania Poland Romania Slovakia Czechia Hungary Poland Czechia Slovakia Romania Hungary Skilled Workorce with Cost Advantage s education system has been upgraded to support a skilled labor pool that meets business requirements.. Annual Number of Graduates (thousands) Availability of Qualified Engineers (10=Available; 0=Unavailable) Availability of Competent Senior Managers (10=Available; 0=Unavailable) University Vocational & Technical High School Labor Force by Education Level University High School & below 23.2% 10% Labor Cost per hour in Manufacturing 27.8 $, 2017 Remuneration of Management/Engineer Total base salary plus bonuses and long-term incentives $K, % % Source: Ministry of National Education, Council of Higher Education, Turkstat, IMD World Competitiveness Yearbook Executive Opinion Survey based on an index from 0 to 10; Eurostat, US BLS

12 South Africa Poland Romania Czech Rep. Bulgaria Austria Brazil Finland India Spain Japan Russia China India Russia Canada Brazil USA Switzerland Poland OECD Reforms has implemented sweeping reforms in many areas and continues to introduce new reforms.. Coordination Council for the Improvement of the Investment Environment 2001 New FDI Law 2003 New Labor Law Ease of company establishment (Law No: 4884) Establishment and Operating Licenses 2004 New Banking Law 2005 Tax Reform (Corporate Tax %20 down from 33%) 2006 ISPAT New Insurance Law 2007 Investment Incentives Overhaul of Social Security System 2008 MAJOR REFORMS R&D and Innovation Incentives Upgrading Investment Incentives 2009 New Commercial Code 2011 New Code of Obligations New Capital Market Law 2012 Removing Restrictions on Foreigners Purchases of Real Estate Upgrading Investment Incentives Unifying All Exchanges (Stock, Derivative, Gold, etc.) under BIST 2013 Istanbul Arbitration Center 2014 Upgrading Investment Incentives Personal Data Protection Law 2016 Production Reform Package Industrial Property Law (IPR) 2017 New Labor Courts Code Amendments to improve doing business (Law 7099) 2018 Number of Days to set up a Company, 2018 FDI Regulatory Restrictiveness Index, Down from 38 days in = Closed to FDI 0 = Open to FDI Down from 0,283 in Internationallyminded people Source: OECD, World Bank

40.5 41.1 43.8 47.7 43.4 46.5 46.9 47.4 47.5 48 48.9 50 51.6 51.8 52.1 55.3 74.3 74.1 73.7 71.8 71.3 70.8 70.4 67 66.8 66.6 62.2 59.8 55.1 54.4 62.2 67.3 68.

. Foreign Direct Investment Law Bilateral Investment Protection Treaties with 75 countries Treaties to avoid Double Taxation with 80 countries Total Tax and

Finance, WB Doing Business Report, Total Tax Rate: Profit or corporate income tax, social contributions and labor taxes paid by the employer, property taxes,

13 Business-friendly offers protection and ease of doing business.. Foreign Direct Investment Law Bilateral Investment Protection Treaties with 75 countries Treaties to avoid Double Taxation with 80 countries Total Tax and Contribution Rate, 2017 (% of Profit) International Tax Competitiveness, 2017 (Index=100 as most competitive) Source: Ministry of Economy, Ministry of Finance, WB Doing Business Report, Total Tax Rate: Profit or corporate income tax, social contributions and labor taxes paid by the employer, property taxes, turnover taxes and other taxes (such as municipal fees and vehicle taxes). Tax Foundation (Tax competitiveness measures countries tax policies five categories: corporate income tax, consumption taxes, property taxes, individual taxes, and international tax rules.)

Lucrative Incentives Investors are offered lucrative

. Manufacturing Incentives Tax deduction & exemption +

Zones Exclusive Zones Tax deduction & exemption +

Incentives for Service Exporters Tax deduction for

e c t u r e D e s i g n S o f t w a r e Medical

EDUCATION H e a l t h c a r e Technology Development

14 Lucrative Incentives Investors are offered lucrative incentives in many ways.. Manufacturing Incentives Tax deduction & exemption + Employment Incentives Payroll & Training support + Free Zones Exclusive Zones Tax deduction & exemption + Organized Industrial Zones Developed infrastructure Incentives for Service Exporters Tax deduction for exporting services in; E n g i n e e r i n g A r c h i t e c t u r e D e s i g n S o f t w a r e Medical Reporting Accounting Call Center D a t a c e n t e r EDUCATION H e a l t h c a r e Technology Development Zones To support R&D Tax deduction & exemption+ Industry Academia R&D and Innovation Incentives Tax deduction & exemption +

15 Benign R&D Ecosystem R&D incentives are further supported by a favorable ecosystem.. Number of Researchers (thousands) Over 100 R&D centers by foreign companies Increasing R&D Spending ($ Billion, PPP) Poland 12 9 Poland Hungary Romania Hungary Romania Selected Foreign Companies conducting R&D in Source: OECD, Eurostat, Turkstat, PPP: Purchasing Power Parity

. AUTOMOTIVE 14 th largest manufacturer 1

billion AEROSPACE & DEFENCE ENERGY FOOD &

16 Opportunities offers abundant opportunities in a variety of sectors.. AUTOMOTIVE 14 th largest manufacturer 1 million vehicle production Market: $24 billion Export: $24 billion MACHINERY & ELECTRICAL EQP. Largest TV & white goods producer in Europe Market: $38 billion Export: $22 billion AEROSPACE & DEFENCE ENERGY FOOD & BEVERAGE INFRASTRUCTURE FINANCE $15 billion defense spending Maket: $6 billion (industry) Export: $2 billion Air passengers: 193 million Market: $70 billion Growing demand Energy corridor Untapped renewables Market: $74 billion Export: $17 billion Exports 1,781 products to 190 countries $123 billion PPP investment ( ) More opportunities in transport, energy, health Robust growth with double digits Islamic finance to grow Istanbul Financial Center OPPORTUNITIES Source: Turkstat, Ministry of Science, Technology and Industry, market values as of 2016, exports as of 2017

17 Foreign Direct Investment (FDI) s value has been appreciated by foreign investors with increasing FDI inflow to FDI Inflows ($ Billion) 193 Number of Foreign Companies in ( 000) (30 years) (15 years) Azerbaijan 4.0% Switzerland 1.7% Japan 2% Russia 6.1% Austria 6.1% Germany 6.5% Spain 6.6% China 1.3% Top Investors* USA 9.3% UK 11.9% Netherlands 11.6% Gulf 9.4% Wholesale & Retail Trade 5.5% Transport & Storage 4.4% Information & Communication Services 8.4% Construction 3.1% Energy 12% Others 8.1% Top Sectors* Manufacturing 24% Finance 34% Source: CBRT, Ministry of Economy, ISPAT Team Analysis *Geographic (adjusted) and sectoral breakdown of cumulative gross inflows of equity FDI from 2003 to 2017

investment in wind power plant (1GW) 300

mill (Kütahya) IFM Investors acquired 40%

18 FDI Foreign direct investors have confidence in and continue to invest.. Notable Recent Investments Mar 17 Aug 17 Sep 17 Oct 17 Part of consortium for $1 billion investment in solar PV (1GW) Part of consortium for $1 billion investment in wind power plant (1GW) 300 million greenfield investment in paper mill (Kütahya) IFM Investors acquired 40% of MIP for $869 million Mar 18 Apr 18 Apr 18 May 18 ZTE acquired 48.04% of NETAS for $101 million DFDS acquired 98.8% of U.N. Ro-Ro for 950 million 100 million greenfield investment to produce hybrid engines 230 million greenfield investment

19 What can Invest in do for you? assist you before, during and after your entry into A governmental agency reporting to the President Private sector approach with public sector capabilities Acting as your solution partner General & customized business information & Sectoral analysis & reports Site selection support to find appropriate location/land for your investment Arrangements of meetings with governmental bodies and other stakeholders Facilitating your investment at all stages Matchmaking with local partners & establishing business linkages Project launch & Press release Services Facilitating your visit to

REPUBLIC OF TURKEY PRIME MINISTRY

REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey (ISPAT) Investment Climate and Doing Business in Turkey Murat OZDEMIR Country Advisor Canada ozdemir.murat@invest.gov.tr