Overview of investment niches and markets in Turkiye for foreigners

Turkiye's extremely advantageous geographical position with its location in two parts of the world, as well as its proximity to the Arab countries, provide a lot of advantages to the investment business sector.

In addition, the large geographical area on which Turkiye is located and the strategic position that it occupies among other countries, as well as common borders with many states, such as Syria, Iraq, Iran, Bulgaria, Azerbaijan. Armenia, Greece, Georgia make the country a kind of commercial bridge connecting Europe, on the one hand, and Arab and Asian countries, on the other. The Bosporus Strait is strategically important, which is a sea corridor for merchant ships between Europe and Asia. In addition, the many seaports in Istanbul, Antalya, Izmir, Mersin and other Turkish provinces bordering the seas are among the important, attractive opportunities that greatly distinguish Turkiye from other world states in terms of investment.

Economic benefits

At the moment, the Turkish economy is recording positive numbers. The Turkish government aims to make the country a center of attraction for domestic and international investors with low risks, high confidence and good returns through legal reforms and an improved investment climate.

Turkiye predicts economic growth of 5% in 2023. Preliminary figures for the second half of 2022 point to moderate growth under the influence of a slowdown in the global economy. Overall employment in the country has exceeded pre-epidemic levels and reached a historic high. As of September, the total number of employed people reached 31.4 million, while as of August the unemployment rate fell to 9.9%, the lowest figure in the last 8 years. According to the Minister of Economy of Turkiye, Turkish exports hit records every month this year. Its total volume exceeded 253 billion US dollars in October, reaching the highest level in the history of the republic.

On October 20, the Central Bank of Turkiye, despite strong inflation, lowered the base rate by 1.5% points to 10.5%. Annual inflation in Turkiye rose to 85.51% in October, the highest in 24 years.

Turkish President Recep Tayyip Erdogan is pushing for continued low interest rate policies to stimulate economic growth.

According to a study by PricewaterhouseCoopers (PwC), by 2030, the Turkish economy will become the twelfth largest economy in the world with a gross domestic product . which could rise to $2.996 trillion.

Negative factors

The tragic events associated with the strongest earthquake on February 6, 2023 in the southeast of Turkiye and northern Syria with an epicenter near the city of Gaziantep affected the economic growth of the country. According to the US Geological Survey, the economic cost of the current earthquake in Turkiye could be about 2% of GDP (according to official data, for 2021 it amounted to $819.04 billion, figures for 2022 were not announced). The province of Gaziantep, which is called the economic center of southern Turkiye, suffered the most. Logistics and transport infrastructure in the disaster area has been severely damaged, and this will have an impact on the entire economy of the region. The main negative consequences of the earthquake in the medium term are a decrease in the country's tourist attractiveness and risks in the reliability of the planned gas hub project , experts predict.

Support for investments by the state

Turkiye has achieved political and economic stability in recent decades. This has turned the country into a major magnet for foreign direct investment and contributed to the creation of a stable investment environment, in addition to the huge leap made by its economy.

The country has established a comprehensive investment promotion mechanism agreed with the Ministry of Industry and Technology regarding the location and cost of investments, as well as the sector in which investments will be made.

Turkiye provides foreign investors with business opportunities such as VAT exemption, duty reduction and tax exemption, etc.

Due to the fact that the law on foreign investment is based on the principle of reciprocity, foreign investors enjoy the same rights and obligations as local investors. Any type of company provided for in the Turkish Commercial Code can be established by a foreign national, whether it is a joint stock company, a limited liability company, a cooperative company or a solidarity company.

The investor must also comply with international standards and bilateral trade agreements such as BIT, etc. In particular, the Turkish Coordinating Council for the Improvement of the Investment Environment (YOİKK) forms actions and directions to improve the investment environment and increase capital inflow into the country.

Also, a foreign investor can open branches of his company or representative offices, which are not representative offices of individual legal entities, but are associated with the main company and do not require special capital.

Turkiye's compliance with the double tax treaty can ensure that foreign investors are not subject to it, which has greatly facilitated investment conditions. Add to this a clear legal basis for the transfer of assets, the digitization of procedures for obtaining residence and work permits, as well as the possibility of obtaining Turkish citizenship.

Turkish laws give foreign investors additional incentives by giving newly established companies six months to one year to organize their trade before they are offered tax returns and before they reach the five Turkish employees per foreign employee formula.

Interesting niches for investment in Turkiye

1. Hotel business in Turkiye

It is currently at a very high level of development, offering an excellent quality of service, as well as the opportunity to purchase it on a turnkey basis. In connection with the restoration of demand for tourism services, the hotel business in the country is growing, which has led to significant investments from foreign investors. They are interested in investing in commercial real estate in Turkiye on the shores of the Mediterranean and Marmara Seas, and the Black Sea coast is also actively developing. Investors, based on market analysis, purchase operating hotels in Turkiye or land for the construction of hotels. The hotel business is one of the main sources that fill the state treasury. The investment depends on the star rating of the future hotel. The income of hotel projects is about 40%, but 100% returns are not uncommon. The hotel business in Turkiye is a promising and fast-paying investment area. The absence of the full amount to launch the project can be solved with a profitable loan at 4% per annum.

2. Export of goods. Logistics and transport services

Today, Turkiye has become a new transit hub for foreign, including Russian, importers. Importing goods through Turkiye has a number of advantages for traders. This is facilitated by the developed logistics infrastructure of the port of Istanbul. Transportation to the country can be carried out by sea, rail, road, as well as using multimodal schemes.

The country is also interesting as a transit hub for such regions as Latin and North America, Southeast Asia, Africa and Southern Europe. From here, cargoes are delivered mainly to the port of Istanbul, the largest sea harbor in the country, which accounts for about 80% of all imports. Port Istanbul has four harbors: Inner, Middle, Outer (European side) and Haydarpasa (Asian side). The sea harbor can serve up to 1,134 general cargo ships per year, and dry bulk berths can accommodate about 80 ships per year. The container terminals of the Istanbul port are able to handle over 1,200 ships per year and 144,000 TEU of containerized cargo. Warehouses with a total storage capacity of 6 thousand TEU are located here, plus there are 31 hectares of space for open storage of goods and 2 hectares of covered storage facilities. Outside the port there is the possibility of additional storage of about 52.8 thousand TEU.

3. Construction and real estate

The infrastructure of Turkish cities has been developing and transforming on a large scale in recent decades. Significant projects are being implemented in the field of reconstruction of roads and bridges, as well as in the field of real estate. The construction sector is growing at the highest rate. Construction. in Turkiye has always brought huge income to foreign investors, including a strong increase after the increase in migration flow. You can invest assets in the construction of an industrial or government facility, as well as invest in residential and commercial real estate with further sale.

Investing in real estate in Turkiye provides a profitable return on investment based on the attractiveness of tourism in Turkiye, the demand for rental and purchase of housing during the tourist season, which lasts almost the entire year.

The Turkish government continues to provide the necessary conditions for foreign investors to increase foreign flows into the country, and among these benefits is the exemption from Turkish value added tax, which belongs to foreign investors who do not live in Turkiye. It is known that value added tax in Turkiye varies from 1% to 18% of property sales.

4. Production

Turkiye is part of the G20, which represents 85% of the world's gross domestic product, 75% of world trade (including intra-EU trade) and two-thirds of the world's population. Therefore, Turkiye has become a reliable source of high quality consumer goods and is now the largest producer in Europe. The country has industrial estates that are designed to enable companies to operate in an investment-friendly environment by providing infrastructure that includes everything needed, including social facilities. Infrastructure in industrial areas also includes roads, water, natural gas, electricity, telecommunications, waste management, and other services. Turkiye has 322 organized industrial zones in 80 provinces, 255 of which are currently in operation and the remaining 67 industrial zones are under construction.

5. Agriculture

In order to encourage foreign investment, the Ministry of Agriculture and Forestry of Turkiye has created a platform for those wishing to invest in the agricultural sector, given the availability of an appropriate climate, fertile soil, abundance of water and an abundance of arable land.

The main conditions for investing in this industry are:

• Requirement for agricultural investment companies to purchase agricultural land of at least 1,000 square meters in cities designated by the Turkish state.
• Establishment of a company with a capital of at least TL 100,000, provided that the project is registered in the name of this company.
• Submission of a feasibility study for an agricultural project for a period of five years, and this study must be approved by accredited consulting bureaus.
• Providing a source of irrigation by laying a water pipe or digging groundwater wells within Turkish agricultural land.
• The project must comply with the Turkish Agricultural Investment Law for Foreigners.

If a foreign investor participates in a project together with a local Turkish investor, this entitles him to state support in the amount of up to 50% of the project cost.

6. Trading

The high quality of Turkish products and well-known brands that are produced in Turkish factories are very popular with merchants in many countries around the world. Therefore, the idea of import and export seems to be one of the brightest for commercial activities and investments in Turkiye. Many commercial facilities such as warehouses, factories, shops and commercial offices will support commercial investments and provide them with a reliable infrastructure.

Turkiye also takes part in the global project of the New Silk Road, which increases its attractiveness as a trade hub.

Thus, thanks to the above factors, Turkiye is one of the most promising and attractive countries in the world for foreign investors.