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FDI - Where Does Turkey Stand?
Orhan Cem
Lead Partner, Advisory Services, PwC Turkey
TURKEY WHERE THE OPPORTUNITIES ABOUND
ON THE WAY TO SUCCESS
February 21-22, 2007
PwC
Agenda
The Outlook
What is Turkey's potential in attracting FDI?
Where does Turkey stand in the FDI league?
“To Do” List
PricewaterhouseCoopers
Outlook & Potential
Turkey is one of the world’s ten “Big
Emerging Markets” with GDP of
approximately USD380 billion at current
prices; based on World Bank estimations
Turkey is the 17th biggest economy in the
world on a PPP basis.
As per the “World 2050” report issued by
PwC in March 2006, the Turkish economy
will grow with a CAGR of 5.6% from 20052050 and will reach USD4.1 trillion GDP in
2050 (at 2005 prices) and USD40,000 per
capita income, becoming the 12th largest
economy of the world.
In 2006, M&A transactions generated a
USD17 bn FDI inflows.
FDI is steady in the services sector.
Privatizations, M&A activity in the banking
sector and foreign purchases of real estate
are other factors supporting the continued
strength of FDI inflows.
PricewaterhouseCoopers
1
Growth Potential
Population
Turkey offers high growth potential to foreign
investors.
35%
EU-25
Turkey
30%
26%
27%
30%
27%
25%
20%
20%
18%
16%
15%
17%
11%
8%
10%
5%
Finance Sector
Loans / GDP(%)
for benchmark countries
Netherlands
Denmark
England
Portugal
Germany
Austria
Spain
EU-25
Belgium
France
Italy
Greece
Latvia
Hungary
Slovenia
Czech Republic
Poland
Turkey
174
166
142
138
136
125
121
118
107
93
88
76
56
48
48
39
35
23
Turkey figures (2005)
PricewaterhouseCoopers
0%
0-14
15-29
Deposits / GDP(%)
for benchmark countries
Belgium
Netherlands
England
Germany
Spain
Portugal
Austria
EU-25
Greece
France
Czech Republic
Latvia
Italy
Slovenia
Turkey
Estonia
Poland
Hungary
143
122
118
113
104
103
98
96
96
77
70
66
58
57
47
46
46
45
30-49
50-64
65+
GSM Sector
70 in 2006
120
97
Penetration
80
per 100
inhabitants 60
40
(2005)
100
90
60
20
0
EU-15
EU New Entrants
Turkey
Retail Sector
Leaseable
Area per
1000
inhabitants
(2005)
800
700
600
500
400
300
200
100
0
734
230
121
Norway
England
Italy
80
Czech
Repuplic
32
Turkey
2
FDI Comparison
FDI to Turkey is picking up. Forecasts show that in 2006, FDI inflow / GDP reached 5%.
The IIF estimates that Turkey will attract some USD22 bn in FDI which amounts to
approximately 10% of global net direct investment to emerging markets in 2007.
FDI Inflow (USD mn) –Turkey
FDI
2002
2003
620
750
2004
1,300
2005
8,500
FDI / GDP – BRIC and Turkey
2006*
16,000
5%
*As of November
Brazil
Russia
India
Turkey
China
4%
FDI Stock (USD bn) – BRIC and Turkey
3%
2%
1990
2000
2005
1%
Brazil
Russia
India
China
37,243
n/a
1,657
20,691
103,015
32,204
17,517
193,348
201,183
132,491
45,274
317,873
Turkey
11,194
19,209
42,170
Source:
Source:
UNCTAD,
PwC Analysis
World Investment Report, 2006
PricewaterhouseCoopers
0%
2001
2002
2003
2004
2005
Source: PwC Analysis
3
Changing Competitive Landscape – Understanding the Profile of FDI
More foreign companies entering
the market
Major sectoral privatizations
Various companies of different origins entered the
Turkish market recently
MOBILE
REFINERY MERSIN PORT
IRON&
STEEL
ALCOHOL
Expected privatizations
TOBACCO
LOTTERY
PETRO
POWER
DISTRIBUTION CHEMICALS
IZMIR PORT
TURKISH AIRLINES
PricewaterhouseCoopers
4
Competitiveness
Turkey moved up 12 places from last year in the WEF’s “Global Competitiveness Report,”
and was ranked 59th among the125 world economies scrutinized by the report.
Turkey is most likely an efficiency-driven economy.
WEF – Global Competitiveness 2006
Source: World Economic Forum
PricewaterhouseCoopers
5
Competitiveness
Although Turkey has certainly not dealt fully with all the key determinants of
competitiveness at its level of development, such as macroeconomic stability, she has
made good progress in factors which tend to become increasingly important at more
advanced stages of development, such as business sophistication and innovation.
Turkey vs BRIC and EU New Entrants
Institutions
7
6
Innovation
Infrastructure
5
4
3
2
Business Sophistication
1
Macroeconomy
0
Technological Readiness
Health and Primary Education
Market Efficiency
Higher Education and Training
BRIC Average
Turkey
EU New Entrants
PricewaterhouseCoopers
Source: World Economic Forum
6
“To Do” List
Turkey has a long list of homework to be done.
These issues are taken as a discount factor on the valuation of Turkish businesses / assets.
Corporate
Governance
Global
competitiveness
Fight against
corruption
Transparency
More
privatization
Healthy financial
reporting
Branding
Simple and
effective
regulation
and less
bureaucracy
Training and
education
Tight fiscal
balance
Fair tax
environment
Higher value added
products
Efficient
legal
structure
Well
functioning
liberal markets
Healthy
financial
system
Technology
Innovation
Protection
of
intellectual
property
PricewaterhouseCoopers
Investment in
research and
development
7
Question Marks & Concerns
• “Laissez faire laissez passer” vs Strategic Approach
• Macroeconomic environment has improved significantly compared to the past but there is a
need for nationwide strategy for FDI.
• Turkey is mostly attracting FDI through privatizations and M&A deals –asset sales, whereas
green field FDI is limited.
Number of Greenfield Investments
2002
Brazil
Bulgaria
China
Czech Republic
Hungary
India
Poland
Russia
Turkey
175
77
586
94
211
249
91
199
45
2003
291
97
1,303
141
214
452
155
429
69
2004
260
110
1,547
137
212
688
229
380
66
2005
158
130
1,196
127
173
564
234
479
62
Source: UNCTAD, World Investment Report, 2006
PricewaterhouseCoopers
8
Thank you.
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