GENERAL Huge domestic market (70 mln people)Huge domestic market (70 mln people) Location at the crossroads between East and WestLocation at the crossroads between East and West High labor force potentialHigh labor force potential
STABILITY Low political stabilityLow political stability Accomplishment of structural reformsAccomplishment of structural reforms Improved resilience to shocks, reduced vulnerabilityImproved resilience to shocks, reduced vulnerability EU membership expectedEU membership expected
LEGAL SYSTEM Business legislation not sufficient enoughBusiness legislation not sufficient enough Poor implementation of lawsPoor implementation of laws IncompetentIncompetent bureaucracy bureaucracy
LEGAL SYSTEM ctnd. Frequent changes in legislationFrequent changes in legislation Lack of political cultureLack of political culture Corruption and briberyCorruption and bribery UnnecessaryUnnecessary sectoral licenses sectoral licenses
TAXES Increasing tax burdenIncreasing tax burden Lack of viable tax systemLack of viable tax system Vast unregistered economyVast unregistered economy
INCENTIVES Country promotion inadequateCountry promotion inadequate Generous incentives for investorsGenerous incentives for investors No discrimination between foreign and domestic investorsNo discrimination between foreign and domestic investors I need information about Turkey!!!
LABOR Good competitivenessGood competitiveness High skilledHigh skilled Increasing labor costsIncreasing labor costs Large and low efficient agricultural sectorLarge and low efficient agricultural sector
INTELLECTUAL PROPERTY RIGHTS Crucial importance for developmentCrucial importance for development IPR protection in place, but ineffectiveIPR protection in place, but ineffective EU standards missingEU standards missing
LAND Shortage of appropriate land for investmentsShortage of appropriate land for investments No space planningNo space planning Rehabilitation of Organized Industrial Zones neededRehabilitation of Organized Industrial Zones needed
INFRASTRUCTURE Poor transportationPoor transportationinfrastructure Basic infrastructure insufficientBasic infrastructure insufficient Low R&D supportLow R&D support Monopolization of essential branchesMonopolization of essential branches
Late improvements FDI law enacted Company establishment simplified 19 3
The Foreign Direct Investment Law of 2003 Freedom to investFreedom to invest Freedom of profit transfersFreedom of profit transfers Acquisition of real estatesAcquisition of real estates International arbitration allowedInternational arbitration allowed Employment of foreign staffEmployment of foreign staff It’s getting better!!
Major FDI obstacles Poor legislationPoor legislation Over-regulationOver-regulation BureaucracyBureaucracy Slow pace of reformsSlow pace of reforms Political resistancePolitical resistance
Investors’ institutional fears Political interferencePolitical interference Weak justice systemWeak justice system CorruptionCorruption Poor implementation of IPRPoor implementation of IPR
Investors’ economic fears Lack of economic stabilityLack of economic stability Chronic inflationChronic inflation Exchange rate instabilityExchange rate instability
Selected bibliography to the 2nd Part 1. 1.Gros D., (2005) Economic aspects of Turkey’s Quest for EU membership, CEPS Policy Brief no. 69/2005. 2. 2.Investment Environment and Foreign Direct Investments in Turkey, (2004) Working Paper for Investors Advisory Council Meeting in March 2004, Turkish Industrialists’ and Businessmen’s Association, Istanbul. 3. 3.Loewendahl H. and Ertugal-Loewendahl E., (2001) Turkey’s Performance in Attracting Foreign Direct Investment, Implications of EU Enlargement, European Network of Economic Policy Research Institutes Working Paper no. 8.
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