Investment Opportunities in Turkey - Coursework Example

INVESTING IN TURKEY By Name Class (Course) Instructor (Tutor) Institution The City and State The Date INVESTING IN TURKEY Executive Summary The main objective of this essay is to explore turkey as a country full of investment opportunities and are up for grab from foreign investors like us here in the UK. A survey was conducted to identify the key investment opportunities that turkey has to provide and how they can be financed. The results indicate that indeed turkey is full of good and viable investment opportunities that are only waiting to be assessed and explored. The essay concludes that turkey is a good country to invest in and the only thing remaining is to know what you want to invest on. It is recommended that foreign investors storm turkey and exploit the wide range of investment opportunities that are available. Introduction Turkey has a business culture that is similar to the rest of the countries located in the Mediterranean and it is recommended that investors should focus on building relationships with customers as it creates confidence among investors and the customers. Before any investor starts financing his/her investment opportunity a thorough research on Turkish culture is advised. Turkey has a wide range of investment opportunities ranging from the tourism sector, construction industry to textiles industry. Turkey is a good place to invest because the government is investor-friendly and has established an agency to serve this purpose. The country has an Investment Support and Promotion Agency (ISPAT) which works with investors before, during and after their entry to turkey. Investment Opportunities in Turkey Investing in the Tourism Sector- currently, turkey is the 6th most popular in terms of tourist destination in the whole world and it attracts more than 30 million tourists in a year and the figure rises every year. By 2023 the tourism sector is expecting to receive 50 million tourists who will generate revenues of up to 50 billion US Dollars and this presents a great opportunity to investors. The tourism sector continues to grow because turkey is favorably located with mega projects seek to cater for the increased number of tourists coming to the country. With turkey expected to attract more than 40 million tourists in a year, our associates in the UK should consider investing in this opportunity in both the established and newly developing subsectors in the industry. Investing in Real Estate- in the last decade the real estate sector has consistently contributed to Turkey’s GDP and its estimated to be about 5%. A total of 6.7 million residential units is going to be destroyed and rebuilt for the coming 20 years meaning that the country will build 334000 residential units every year. The government has allocated a budget of USD 400 billion to this initiative and the private sector has been given the leading role. The government views the real estate as a promising market in Europe and that’s why it's dedicating such a huge budget. Turkey is strategically situated at the crossroads of Europe, the middle east, and Central Asia and it is a home to more than 78 million people. This provides real estate developers with huge opportunities to invest in. Energy and Renewables- recently turkey has become one of the most growing markets of energy in the world. Following the privatization of generation and distribution of power, the private sector has been provided with an opportunity to invest and compete with other organizations. The energy demands in turkey have risen with the expanding economy, rising per capita income, increasing population and the rapid pace of urbanization. The energy demands are predicted to increase by 6% per year until the year 2023. To satisfy the energy demands by 2023 the country is required to generate a total of 120 GW and this is where the private sector will chip in and invest (Demirbaş, 2001;1240). Transportation and Logistics- the geographical location of turkey which provides easy access to four great continents in North Africa, Central Asia, the Middle East and Eastern Europe. This means that turkey functions as a hub of all the freight carried around the four regions. The Turkish government has set a target to improve the logistics infrastructure in the country so as to reduce the amount of time taken to ferry goods from one place to another. The set targets include the construction of ports in every sea that surrounds turkey, constructions of new airports that will increase the number of passengers to 400 million a year among others. Immense growth is therefore expected in the coming years and the private sector should invest in this sector. Investing in Mining and Metals – the sector of mining and metals in turkey has grown over the years because of the improving economy. Most part of turkey covers the western portion of the Tethyan-Eurasian Metallogenic Belt which is rich in ophiolite. This means that turkey has proven it has the potential for investors who are interested in mining. The Metallogenic belt has only been exploited partly meaning that companies that engage in mining activities should head to Turkey. Currently, mining in turkey is limited to surface excavations meaning that huge potential with deep drilling awaits the international investors. Turkey also provides mining industries with high-quality labor pool, low transportation, and drilling costs, proximity to major markets and lucrative government subsidies and this comes as an advantage. Investing in the ICT sector- information and communication technologies in the recent years have become an important part of the economy as it is affecting the business world directly. The government of Turkey has realized that this sector will be a major determinant of what happens in the future and it has challenged both local and international investors in making sure this sector is well financed. The government has even started the required studies so as to help it have a future say in the sector. Investors should be aware of the increasing number of internet users in turkey, they should also know that ICT expenditure is expected to grow faster than that of world average among other predicted changes (Jaafari, 2001:90). The Sector of Chemicals also need Investors – the chemical industry contributes so much to manufacturing since it generates many end-products like plastics and intermediate products which are used by other industries. Since Turkey’s economy is being driven by these industries which depend on chemical industries investors are being told to invest in chemical industries. Many factors are making Turkey be an attractive chemical industry investment venue and they include the geographical location of the country which makes it be near large and developing trade markets, Turkey is the second major exporter of petrochemicals, Turkey is also the 4th largest producer of paint in the whole of Europe and it is also the largest consumer of textile and construction chemicals. In the coming years Turkey, chemical industry sector is poised to grow extraordinary and reach USD 50 billion by 2023 and that is why investors should act. Agribusiness and Food- Turkey enjoys a supply of water from great rivers like Euphrates and Tigris rivers and this has made its agricultural sector to have a great development like that of ancient Mesopotamia. Turkey has very favorable climatic and geographical conditions, large lands which are easy to cultivate and this makes Turkey be one of the leading country in agriculture and food sector. More than a quarter of Turkeys’ working population is employed in the agriculture and food industry which contributes to more than 7% of the country’s GDP. Turkey currently holds number 7 as the largest producer of agricultural products and leads the world in the making of dried figs and apricots. Turkey is also among the largest producers of honey, milk, cereal crops, vegetables and plant species which are exported to other countries. This wide range of agricultural production makes Turkey maintain balance and dictate trade patterns thanks to its geographical position. Turkey exports a handful kind of agricultural products to more 180 countries a year and this accounts to 16.8 USD. Many daily products that Turkey produce every year are consumed largely by its own population since they form part of traditional Turkish diet. The unpacked products have dominated the Turkish market for a very long time and this gives potential investors a chance to break into the local market and also the international market around Turkey. The government of Turkey is exploring a possibility of it being the headquarters and center of the agricultural sector which means that investors will not struggle to find a market for their produce ones they decide to invest (Rovčanin, 2005:86). Key Risks Associated with Investing in Turkey Corruption and Bribery- the issue of corruption and bribery is one of the main problems affecting the Turkish economy and the society. Corruption has played an important part in all the economic crisis that are currently facing the Turkish government. It has reached a point where a top government official like a prime minister is involved in corruption related matters. An investor investing his resources in turkey is likely to encounter or corruption of one form or another. Investors are being asked to pay bribes or give gifts so as they can be given business permits so that they can do business in Turkey. The level of corruption depends on the type of business to be conducted, the sector and the region (Kozan at el, 2006:120). Terrorism- the threat of terrorism is on the rise as there are many active terrorist groups in the country. The main terrorist group that is a cause of concern is the separatist Kurdistan Workers Party which operates in most part of the country where investors are willing to invest and develop. The PKK terrorists group have carried many attacks in the southeast of the country destroying many foreign businesses leading to an unimaginable loss. Attacks that are frequently carried out in the cities of Istanbul, Ankara, and Mersin scares away foreign visitors who promote tourism. This makes major hotels and restaurants in the cities to close because they don’t want their property destroyed and this have severe effects on the country’s economy (Tiong, 1990:320). Starting a Business- although starting a business in Turkey may take less than a week the number of procedures one has to go through are many and difficult to sail through for foreign firms. Foreign firms have to deposit a percentage of capital to the account of the Competition Authority after which they have to deposit an initial capital into a bank. These deposits take days to be verified which may be annoying if you want to start your business faster. After the business have been established it takes up to 70 days for an electricity connection to be done by a number of engineers and to be checked by BEDAS so as to be given a license by the local municipality and Chamber of Electrical Engineers. This kind of delays is not good for any investor starting a business (Luo & Tung, 2007:490). Political Risk- the term political risk is used to describe the uncertainty regarding adverse political decisions. Turkey being a developed country have the tendency of following the law of free market where the government has very little or no intervention and many upcoming market business are privatized anytime. Political decisions may lead to war like the one Turkey just experienced in the year 2016 where there was a tempted coup and soldiers were just killing people. Other political risks that may affect investors is increased taxation, reduction of subsidies by the government, change of the policies that govern the market, and the inability to control the level of inflation. Civil war as a result of political instability can cause closure of industries as may refuse to work or they are totally not able to come to work (Busse & Hefeker, 2007: 400). Managing the Risks Associated with Investing in Turkey Political Risks- many approaches are being made by the Turkish government to help foreign investors adapt despite the uncertainty regarding adverse political decisions to succeed and expand. The Turkish government is providing businesses with consultants who help mitigate the risks brought by political issues. The government always notifies the business fraternity before any decisions like increasing tasks and reducing subsidies are made. The government is also compensating that business that suffers from civic wars that are a result of poor political decisions. Businesses are also being advised to have insurance so that in the case of violence they can be compensated and life moves on (Lam, 1999: 80). Corruption and Bribery- through the anti-corruption framework Turkey has shown efforts of fighting both local and foreign corruption. Many significant changes in the anti-corruption framework are being made so as the country can keep up with the international standards. Turkey has also signed a number of treaties that which are against corruption and they include the United Nations Convention against Corruption, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions among many others. The OECD convention has even been modified to include longer jail terms for crimes related to bribery, that any promise to bribe or offer bribe is criminal and that all foreign public officials will also be a subject of investigations. Approaches are also being made to educate organizations on the importance of not condoning corruption and bribery (Kunreuther, 2002:656). Terrorism- the Turkish is doing anything it can to reduce incidences of terrorism in the country so that investors are not driven away. When the attempted coup happened in 2016 the government captured more than 1000 criminals related to the separatist Kurdistan Workers Party terrorist group. The government has also revised the immigration laws and people are being checked well before they come in into the country through manned gates at the borders. During the year 2014, the rate at which Turkey cooperated with other countries in matters of terrorism increased and this shows that the country is determined to finish terrorism and improve the business environment. The government is sharing more information regarding issues of terrorism with other countries and is an active member of Global Coalition to Counter ISIS (Kreimer at el, 2003: 300). Starting a Business- the number of days taken to start a legal business in turkey have been long full of tiresome procedures with many requirements. The government has made progress in making sure that this is not the case anymore and it have reduced the number of days from 39 in the year 2003 to 7 days in the 2016 and it is expected to reduce to a maximum of two days. The issue where business take up to 70 days before they can be supplied with electricity has been reduced so that investors feel they are wanted in the country. Conclusion Turkey has a wind range of investment opportunities which are waiting to realized and changed into real businesses with great productivity. I would recommend my people in the UK to invest in Turkey and to be specific in the sector of tourism. The tourism sector is growing annually in Turkey and our organization will get the more returns if it invests its $75 billion revenue. The organization should not be rigid in deciding on what sector to invest on as I have discussed every sector in detail. The organization should also be aware that every investment comes with a risk and therefore proper planning will be required before any investment is done. References Demirbaş, A., 2001. Energy balance, energy sources, energy policy, future developments and energy investments in Turkey. Energy conversion and Management, 42(10), pp.1239- 1258. Rovčanin, A., 2005. Investment opportunities as real options. Zbornik radova Ekonomskog fakulteta u Rijeci: časopis za ekonomsku teoriju i praksu,22(2), pp.85-93. Jaafari, A., 2001. Management of risks, uncertainties and opportunities on projects: time for a fundamental shift. International journal of project management, 19(2), pp.89-101. Busse, M. and Hefeker, C., 2007. Political risk, institutions and foreign direct investment. European journal of political economy, 23(2), pp.397-415. Kozan, M.K., Öksoy, D. and Özsoy, O., 2006. Growth plans of small businesses in Turkey: Individual and environmental influences. Journal of Small Business Management, 44(1), pp.114-129. Tiong, R.L., 1990. BOT projects: risks and securities. Construction Management and Economics, 8(3), pp.315-328. Luo, Y. and Tung, R.L., 2007. International expansion of emerging market enterprises: A springboard perspective. Journal of international business studies, 38(4), pp.481-498. Kreimer, A., Arnold, M. and Carlin, A., 2003. Building safer cities: the future of disaster risk (No. 3). World Bank Publications. Kunreuther, H., 2002. Risk analysis and risk management in an uncertain world. Risk analysis, 22(4), pp.655-664. Lam, P.T., 1999. A sectoral review of risks associated with major infrastructure projects. International Journal of Project Management, 17(2), pp.77-87. Read More