The economy management must be tearing its hair out (if there is any left) after the bizarre situation in the judiciary, which investors, especially lawyers, in a country with a well-established judicial system cannot make any sense of!
You work hard for months, go on a world tour, leave no country you haven’t visited, no door you haven’t knocked on, and then there is a squabble inside… You have nothing to say to the foreign investors you meet with!
It’s not just a question of finding funds from abroad; there are a series of “irrational” practices that need to be corrected at home and that take time.
On the one hand, try to clean up the remnants of the previous period, on the other hand, seek foreign resources to keep the wheels turning, and then a legal oddity occurs that will throw all your efforts in the trash!
What Turkey needs to do is very simple.
To reassure investors, both domestic and foreign investors.
I know it sounds utopian, but it would be enough if the Turkish people trusted the government, let alone foreign investors. If only the foreign currency under the pillow came out, Turkey would breathe so easily that it would not need foreigners.
But as I said, this is all a dream.
Not only are we far from being able to reassure investors, but we are also increasing the dose of this insecurity with each passing day.
Will foreign investors come?
Now, after this political turmoil that seems to be taking place in the judiciary, we come across different opinions:
-Foreigners will not come for direct investment, but they may come for short-term hit and run.
-Law and democracy are not that important for foreigners, look how much investment China is attracting.
Let’s start with the latter first. China does not have the kind of democracy we understand, but it has something else that we do not have: “Stability.”
Investors who go to China know that when they wake up the next morning, no decision will be taken that will upset the country’s economy; no decision will be taken that will create a chaotic environment in the country. Moreover, is it possible to compare China’s production structure, resources, export opportunities and labor market with ours?
Let’s come to the first thesis, that foreign investors will come for hit-and-run purposes…
This is not so easy anymore… There are also requirements for those who will come for hit-and-run purposes, that is, for a very short stay, to make money: “Stability.”
Turkey’s benchmark bond yield was around 21.5 percent a month ago. The interest rate is now 41.5 percent.
If foreign investors had come and bought bonds as a “hit and run” a month ago, they would have been “shot down” now, and maybe they were.
The price of a bond with a nominal value of 100 liras, which was bought a month ago for about 82 liras at 21.5 percent interest, has now dropped to 71 liras as the interest rate has risen to 41.5 percent.
There is no exchange rate decline to compensate for this loss, on the contrary, there is a slight increase.
Therefore, in such an environment, hit-and-run would not be possible and no one would take that risk.
Even though no major movement is expected until the elections, a rapid increase in the exchange rate would result in a total loss for foreign investors.
Therefore, foreign investors will be much more cautious in this environment, even those who aim to hit-and-run. After seeing the interest rate increase by 20 points in one month, wouldn’t the foreigner be worried that there will be a similar increase in the next month? Since the price of the paper, which is 71 liras now, will fall as interest rates rise, why should he enter now, he will wait.
Koc Holding’s battery investment decision signals…
The Court of Cassation announced its decision not to comply with the Constitutional Court decision on November 8. Two days after this decision, on November 10, Koç Holding announced that the timing of the battery cell production investment in Ankara, which is expected to be the largest in Europe, was not suitable and therefore the previously signed letter of intent was terminated.
The developments were so overlapping that this explanation was naturally linked to the bizarre situation in the judiciary. “Foreigners were already not making direct investments in Turkey, the latest incident was just the icing on the cake, and a massive investment effort had come to nothing.” This was the general opinion.
Whether the investment in the battery factory was abandoned because of the recent developments, it is possible, but I doubt it. This is not a decision that can be made in two days. But of course, we don’t know whether there was a previous rumor that the Supreme Court of Appeals would make a decision in this direction and based on that, such a decision was reached.
But one thing is certain. Whatever the reason, the abandonment of this huge investment, and the fact that it seems to have been linked to discussions on the legal platform, even if this is not true, will cause all investors who will want to make direct investments in Turkey in the future to reevaluate the situation repeatedly.
The issue, which we first looked at superficially within the framework of the Constitutional Court and the Supreme Court, and then saw that it had a deeper meaning through political analysis, is actually a very negative development that will pose a major obstacle to Turkey’s investment, growth and development.