Elevating Türkiye’s investment appeal

In this interview, A.Burak Daglioglu, president of the Republic of Türkiye Presidency Investment Office (Invest in Türkiye), spoke to Economy Middle East and shared the dynamic economic ties between the UAE and Türkiye. He also outlined the strategic steps being taken to further enhance Türkiye’s attractiveness to global investors.

What are some notable success stories of UAE investments in Türkiye? Can you discuss the role these key players have in strengthening the two countries’ economic ties?

Thanks to the rapidly improving relations, especially in the last three years, we have seen great momentum in the speed of investments. We recently signed a comprehensive economic partnership agreement between the two countries in September. This further encouraged bilateral investments between the two countries. While foreign direct investment (FDI) inflows from the UAE to Türkiye are around $6 billion is good, it’s still not enough. The trade volume between the two countries reached $20 billion in 2023. The target is $40 billion in the next five years, which I think is achievable.

The UAE is a hub for reaching the African and Asian markets. Türkiye is also a hub for those regions, as well as Europe, Central Asia and Northern Africa. We value growing trade volumes because this is often followed by investments. Success stories are across the board, with investments in finance, infrastructure, manufacturing, food and beverages and technology.

DP World, for example, invested in a port operation almost 10 years ago. Meanwhile, ENBD invested in Türkiye when it acquired Deniz Bank. Recently, sovereign wealth funds, such as ADQ and Mubadala Technology Entrepreneurship, have been actively investing in Türkiye. IHC has also invested in an energy company in Türkiye with a one-gigawatt solar capacity.

There have also been a number of transactions by private equity and venture capital funds located in the UAE that have invested in Türkiye. Having large-scale projects is beneficial, but we need to increase projects in the mid-market range, involving other players such as family offices, private equity funds, and corporate investors from the UAE.

Your office reported that Türkiye is now fourth in Europe for attracting international investment projects in 2023. Which sectors are seeing the most investment? What steps are being taken to further boost investment in 2024?

Türkiye has a strong industrial infrastructure and manufacturing abilities supported by the service sectors, including finance and logistics. The economy is resilient to global shocks, such as the pandemic. Many Turkish companies showed rapid recovery.

The diversified economy — along with our ability to implement policies very quickly — all contribute to increased FDI. And these investments are mainly injected into manufacturing businesses in chemicals, machinery, food processing, automotive, auto supplies industries and metal processing.

Now, we also focus on R&D and design centers. Global manufacturing companies continue to establish procurement centers in Türkiye. As such, we’ve been encouraging Turkish companies and SMEs to be a part of the global supply chain. This approach has propelled Turkish exports from $30 billion two decades ago to $255 billion today.

Your central bank governor and finance minister have both said that inflation will start declining in the second half of the year. The central bank had also implemented a series of interest rate hikes since June last year to stem the price rise. How do you see the rest of 2024 playing out?

We’ve had some tough times when it comes to inflation rates. After May 2024, the peak of inflation, we will see a rapid decline in the rate of inflation once it hits around 70 percent. We are expecting a steady and rapid decline in the following months, with the annual year inflation settling at around 38 percent by the end of the year. Then, the target is to have low double digits by 2025 (15 percent) and high single digits (7 to 9 percent) by 2026.

Economic management, both on the fiscal and monetary sides, is key. The goal is to focus on price stability. It will be done through a series of cost-cutting on the public budget.

While we focus on FDIs, portfolio investments keep growing rapidly as well. The central bank is building up reserves as a priority. We also see increased stability in foreign exchange (FX).

The Turkish lira has been among the weaker emerging market currencies, having lost nearly 10 percent since the beginning of the year. How has that affected Türkiye’s exports?

Having a weaker local currency can be helpful for global exports, and some see this as a temporary advantage. The real advantage comes from productivity or competitive advantages like technology. As a matter of fact, in the last two decades, the priority of the government has been to focus on this perspective. Minister of Finance Mehmet Şimşek recently underlined that the competitive edge comes from productivity, technology investment, and higher-skilled people.

If we compare the consumer price index and the FX rate, we can see that Turkish lira has been appreciating since August on a real basis. In the same period, Turkish exports grew to around $255 million. We can expect more growth in exports in the second half of this year.

With inflation under control, we also expect some global central banks to lower the interest rate. Türkiye exports no more than half of its products to Europe. If you add the United States, it amounts to almost no more than 60 percent. So, any development in those markets affects our export performance very quickly.

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Are there any restrictions on investing in Türkiye and transferring money and profits out of the country?

One of the first things the government did since it came into office over 20 years ago was to change the FDI law in Türkiye. The OECD released an index called the FDI restrictiveness index. Two decades ago, Türkiye was among the most conservative countries; now, it is more liberal than even many European countries, including the United States.

Companies can invest in Türkiye without any pre-screening and establish 100 percent foreign ownership. We even don’t call it “foreign.” We call it “international.” This reflects a change of mentality. I would have to say Türkiye is very liberal about divesting or sending dividends out of the country.

Of course, like all countries, there are some regulated areas and industries, such as media broadcasting, banking and energy. Also, mergers of sizable businesses require approval from the competition board.

About A.Burak Daglioglu

A.Burak Daglioglu took on the role of president of the Republic of Türkiye Presidency Investment Office (Invest in Türkiye) in 2022. Before becoming president, Daglioglu held the position of vice president from 2018 to 2022. Moreover, A.Burak Daglioglu held the role of head of PPP department and project director at Invest in Türkiye.

A.Burak Daglioglu has also served as a board member at the Türkiye Wealth Fund since November 2020.

Daglioglu holds a bachelor’s degree in economics from Boğaziçi University, a master’s degree in strategic marketing and brand management from Bahcesehir University, and a global master in finance degree from IE Business School.

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