You know, we returned to rational ground and started to implement a new economic policy… As a result of this policy, foreign investors would have an intense interest in Turkey and investments would increase…
Based on the October balance of payments data released by the Central Bank yesterday, we wanted to take a look at the extent to which we are attracting investment in line with these policies.
I wish we hadn’t! Direct investment is hard to find.
Without real estate sales to foreigners, we are in negative territory! Here is the ten-month data…
– In the January-October period, foreign direct investment inflows amounted to USD 7.8 billion.
– Of this amount, USD 3.1 billion came for real estate investment. Let’s deduct real estate, net inflow is USD 4.7 billion.
– There was an outflow of USD 4.9 billion in these ten months. By outflows, I mean outward investments made by residents, otherwise, all of this amount does not mean that the foreign investments in Turkey are going back, let’s not think like that.
– When we deduct USD 4.9 billion of foreign investment from the USD 7.8 billion of inflow in ten months, we are left with USD 2.9 billion.
– Not all of this USD 2.9 billion can be seen as real investment. We should also look at what this money came for. You know the USD 3.1 billion that came for real estate, that is actually not investment. The purchase of real estate by foreigners is considered direct investment by definition, but if a Russian, an Iraqi, a German or a Briton comes to Turkey and buys a house or a real estate in Turkey, this is classified as direct investment in Turkey. Foreign currency enters Turkey, that’s it, there is nothing that can be considered an investment.
– So how much net investment has come in these ten months? As I mentioned above, the foreign currency brought in by foreigners for real estate is of course a contribution in terms of foreign currency, but it is not investment. Therefore, it is necessary to take the difference between “inflows excluding real estate” and “outflows”.
– The amount in the outflow item, which mainly shows investments made abroad, is USD 4.9 billion. What is the inflow excluding real estate: USD 4.7 billion. The difference is minus USD 171 million!
This is what the situation is all about…
If you look at the recent atmosphere and rhetoric, direct investment is pouring into Turkey! Foreigners are lining up to invest in Turkey!
If you look at the data announced by the Central Bank, there is nothing!
An even stranger picture emerges when we consider these ten months as two periods of five months each…
Foreign investment inflows in the first five months are higher than in the second five months. The source of the decline is obvious; foreigners significantly slowed down their real estate purchases in the second five months.
While the net direct investment inflow calculated excluding real estate was USD 41 million in the first five months, there was an outflow of USD 212 million in the second five months.
In any case, these amounts are neither useful as inflows, nor as a salve for a wound. And as outflows, they do not create an impact that would put Turkey in a difficult situation neither.
The result is very concrete… Turkey has a long way to go in terms of attracting foreign direct investment.
What direct investment is looking for…
The new economic management took office with the view that Turkey had no choice but to return to rational ground.
This was obviously referring to monetary policy.
But even if monetary policy is “back on track”, foreign direct investment does not look at this improvement in the rational basis.
Because monetary policy may be one way today and another tomorrow; it may change.
But when a direct investor comes here and settles down, they are not in a position to sell what they have and leave in a day, to take their coat and leave.
They first and foremost look for and need legal security, just like everyone else does.
They are not inclined to invest in a country where the decisions of the Constitutional Court are not enforced and where it is even said that the Constitutional Court should be dissolved. When even the decisions of the Constitutional Court are not enforced from time to time, isn’t it normal for them to think: “What will we do if one day we have a dispute and end up in court, and a decision comes out in our favor, but this decision is not implemented?”
They think like that and they don’t come…
And the data confirms this…