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Turkish MNCs in 2012 and 2013 - Some Possible New Research Areas Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted.

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Presentation on theme: "Turkish MNCs in 2012 and 2013 - Some Possible New Research Areas Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted."— Presentation transcript:

1 Turkish MNCs in 2012 and Some Possible New Research Areas Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted for the final conference of COST Action IS0905, “The Emergence of Southern Multinationals and their Impact on Europe”, University of Iceland, Reykjavik, Iceland, May 19-20, 2014

2 Global FDI Inflows (Average , ;billions of USD) 11%

3 FDI Inflow Trends Globally  For the first time developing countries took the lead in FDI, accounting for 54%* of the total inflows in 2012  Developed countries share dropped to 39%* in 2012 and expected to continue at that level in 2013  2013 estimates for FDI inflows went by 11%, to an estimated US$1.46 trillion– a level comparable to the pre- crisis average. Inflows to the US continued to decline, while into EU increased  FDI flows to developing economies reached $759 billion in 2013, with increases to Latin America, Caribbean, Africa. Developing Asia is still the largest host region in the world. * UNCTAD, Global Investment Trends Monitor, No: 15, January 2014

4 Turkey’s Role in the West Asia Region – in Regard to FDI  Turkey emerged as a significant investor in the West Asia group - OFDI growing by 73% in 2012 to $4.1 billion.  Turkey’s ranking climbed from 43rd in 2012 to 36th in 2013  According to 64 IPAs views, Turkey is considered as the major developing country source of FDI (most promising investor economies in list)

5 TNCs’ Top Prospective Host Economies for 2013–2015 (Percentage of respondents selecting economy as a top destination) Source: UNCTAD World Investment Report 2013, p. 50 Base on 159 company responses rankings are given in parenthesis.

6 Turkey’s Role in the West Asia Region – In Regard to IFDI  Turkey was less fortunate in regard to FDI’s inflow growth rate in 2012  Although Asia accounted for 58% of FDI to developing countries, inflows to developing Asia fell by 6.7%  Inflows to West Asia declined for the 4th consecutive year  But with $12 billion inflows in 2012, Turkey became the top country (24th among countries that attracted the most FDI, 14th among emerging economies)

7 The Development of OFDI in Turkey  Neo liberal economic practices of 1980s  Privatization wave in 1990s  Customs Union in 1996  Attracting foreign investors, possible licensing and JV agreements  As a result Turkish MNCs developed lower cost alternatives, not to lose their competitive edge in the domestic market  When domestic market shrunk, new business models transferred to international markets

8 Development of Inward and Outward FDI in Turkey ( ; in million USD) Source: UNCTAD World Investment Report 2012 and 2013

9 Turkish MNCs Mode of Investment in OFDI (in percentage) Source: Yurtdışı Doğrudan Yatırım Raporu 2012, Hazine Müşteşarlığı, Mali Sektörle İlişkiler ve Kambiyo Genel Müdürlüğü, Ekim 2013 (Turkish OFDI Report prepared by the Turkish Treasury in October 2013) Turkish Treasury’s research based on Turkish MNCs, representing 95% of Turkey’s total OFDI

10 Turkish MNCs Reasons for Going Abroad (in percentage) Source: Yurtdışı Doğrudan Yatırım Raporu 2012, Hazine Müşteşarlığı, Mali Sektörle İlişkiler ve Kambiyo Genel Müdürlüğü, Ekim 2013 (Turkish OFDI Report prepared by the Turkish Treasury in October 2013)

11 Turkish MNCs’ Investment Decision Drivers* Source: Vale Columbia Center on Sustainable International Investment (VCC), Kadir Has University and the Foreign Economic Relations Board (DEIK), The Emerging Market Global Players (EMGP) Project, December 3, 2009; January 31, 2011 and March reports Since 2011 report, no. of Turkish MNCs with OFDI $100 mio and above rose from 19 to 29

12 Some Further Observations Made on the Vale Report  Increasing tendency by Turkish MNCs towards mining, energy, infrastructure  Though not mentioned in the report, an increase in - MENA & SubSaharan 2 % (2009), 17% (2011) and 12% (2013) -NA,LA, Caribbean 2 % (2009), 6% (2011) and 4% (2013) Turkish Treasury data also supports this

13 The Need to Look Beyond Offical Figures  The reality of undisclosed deals and deal amounts  This fact could have much more impact for some countries  Sometimes the official figures could be one half, or even one third of the estimates  Therefore Turkey’s potential in OFDI and IFDI could be underestimated if only official figures are considered

14 Turkey’s M&A Purchases According to Two Different Sources (in million of USD) Source: UNCTAD World Investment Report 2012 and 2013; Turkish Outbound M&A Review , Deloitte, February 2014 Deloitte figures include estimates, whereas UNCTAD reports only the official figures.

15 Some Recent Trends Highlighted by Deloitte  The average deal amount is nearly halved compared to previous years ($61 mio)  This is due to crisis and lower valuation of companies. Also an indication that OFDI is moving towards medium sized Turkish MNCs  For the first time Turkish MNCs made OFDI in Brazil, Mexico and Thailand  S. African Defy bought for $324 mio by Arçelik in 2011

16 Some Publicized Turkish M&A’s in * Only publicized top deal transactions have been included in this list Source: Turkish Outbound M&A Review, Deloitte, February 2014, other published sources Acquirer /YearTargetTarget OriginSector Stake Acquired (%) Deal Value ($ mio) Anadolu Efes (2012) SAB Miller- Russian & Ukra.RussiaBeer Doğuş Holding (2013)Astir PalaceGreeceReal Estatena598 Genel Energy (2012)The Miran BlockIraqEnergy26450 Yıldırım Holding (2013) Chrome Division of Mechel Russia KazakhstanMining Yıldırım Holding (2012)CMA CGM SAFranceTrans. & Shipping10250 Genel Energy (2012) Bina Bawi Exploration BlockIraqEnergy21240 Yıldız Holding (2013)DeMet's Candy Co.USACandy Permak Makine (2013) San Clemente Palace ResortItalyTourism100197

17 Turkish OFDI Studies by Academia  Although not exclusive, the literature mainly looks into firm specific capabilities and Turkish companies’ reasons for OFDI, such as Erdal & Tatoglu, 2002; Erdilek, 2003, 2005, 2008; Kaya &Erden, 2008; Demirbag & Tatoglu; 2008, Kok & Ersoy, 2009; Kayam & Hisarcıklılar; 2009; Eren- Erdoğmuş, et al  Or choice between acquisition and Greenfield entries are studied by Demirbag et al., 2008  Equity-based entry modes by Demirbag et al; 2009  Performance of foreign equity ventures by Kaya & Erden, 2007  Anıt et al. (2011) compare inward and outward FDI determinants in Turkey  These valuable studies tell us a lot about the Turkish MNCs’ past FDI patterns and lay the necessary foundations to build upon  However early indicators mentioned in business reports should be seriously considered by the academia and integrated into the research

18 Some Possible New Research Areas for Turkish OFDI Studies  If OFDI is getting more widespread among medium sized Turkish firms, how would they differ in their entry strategies compared to larger Turkish MNCs?  If new sectors have emerged in Turkish MNCs OFDI such as energy, manufacturing and real estate compared to the more traditional sectors such as food and beverages, how would this will have an impact on Turkish OFDI?  Although EU and CIS are still important destinations for Turkish MNCs, Latin America and Africa are getting popular. How would different destinations affect their entry modes, entry strategies?  In addition private equity companies have started playing important roles especially in inward FDI but their roles are not studied in regard to IB. (For instance Yardımcıoğlu & Demirel (2008) look into its effect in relation to entrepreneurship).

19 Some Possible New Research Areas for EMNCs based on Accenture 1)Increase in global middle class - Currently 27 other economies-including Poland, Colombia and Turkey -have a greater number of households with an annual income above $30,000. In richer income segment, Turkish households with an annual income of more than $50,000 will see a total increase of $380 billion household income by 2020, the highest of any emerging economy.

20 Some Possible New Research Areas for EMNCs based on Accenture 2) Low-cost business models - Emerging middle classes mean that more and more people want to enjoy better life styles at affordable prices. ‘Better product/service quality for masses at affordable prices’ will continue to be crucial for emerging countries, as technology becomes more widespread. The low-cost business models are especially important in understanding Turkish MNCs OFDI successes.

21 Some Possible New Research Areas for EMNCs based on Accenture 3) The southern-surge in financial services - High growth rates and emerging middle class will also increase the demand for mobile banking, micro-finance and insurance. 4) Infrastructure - both a potential growth area as well as a restraining factor in emerging countries, due to the lack of infrastructure. 5) The growing importance of citizen services such as healthcare, education, housing, transport will continue to get recognition. 6) Since there will be more need for qualified personnel, transfer of knowledge and transfer of education will have a higher priority, possibly leading to distance learning or satellite campuses.

22 Suggestions for Future Research  UNCTAD forecasts FDI flows to $1.6 trillion in 2014 and $1.8 trillion in 2015  Emerging countries will continue to be major interest  Move outside of the conventionally defined research variables, amalgamating business report findings, with that of the academic look  This chain of thought could also be applied to other EMNCs.  EMNCs move very fast, adapting to changing market conditions almost instantaneously.  The academic work published should also gear to this speed.

23 Turkish MNCs in 2012 and Some Possible New Research Areas Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted for the final conference of COST Action IS0905, “The Emergence of Southern Multinationals and their Impact on Europe”, University of Iceland, Reykjavik, Iceland, May 19-20, 2014


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