ISTANBUL FINANCE SUMMIT

Ayşem Sargın, the Chairperson of the International Investors Association (YASED), delivered a speech at "the Istanbul Finance Summit" held on October 9, 2019.

Sargın shared the following information in her speech:

“As the International Investors Association (YASED), we represent 80 percent of international direct investments in our country. Our members have been supporting the development of our country for years,  some for more than 100 years.

Through their investments, they create added value to various fields from manufacturing to employment, technology and export in Turkey. We consider these investments leaving their marks in Turkey as the main catalysts for the sustainable development of our country.

As YASED, we have valuable knowledge and experience. As many of our members have been operating in Turkey for long years, they have attained their long-term goals by overcoming a number of challenges faced by our country over the years. Therefore, we are also proud of representing an investor base approaching Turkey from a long-term perspective and believing in the potential of our country.

We are leaving behind a period of about 5 years during which global capital flows ran between developed and developing countries and international direct investments declined at global level.

Currently, Turkey obtains about 1 percent of global FDI. However, we believe that our country holds a much higher potential than this. Recent international investment movements also support our view.

The United Nations Conference on Trade and Development's (UNCTAD) World Investment Report 2019 states that Turkey takes the 21st place with a rise of 4 ranks in terms of global FDI.

The same report also indicates that the global direct investments fell by 13 percent to $ 1.3 trillion in 2018 but it went up by 13 percent to $ 13 billion in Turkey. Observing a rise in investments inflows to our country within a period of decline in global direct investments is an extremely positive development.


So far the news is so good. However, we experience these developments on one hand while we go through a period where global competition for direct investments is quite tough and we must achieve and maintain success in the face of many uncertainties from geo-political risks to trade wars on the other. In this competitive environment, we must both attract these investments by getting ahead of our rivals and focus on qualified and transformative investments that will prepare our country for the future world by acting in a selective manner.

As you know, trade and investment are complementary elements that go hand in hand. Trade wars and protectionist policies, which have increasingly marked the past few years, prevent the free movement of goods. We observe that these and many other developments have recently led to the differentiation of the criteria that have influenced investment decisions. In this difficult conjuncture, we see that factors such as finance, financial stability, market size and qualified labor force come to the forefront in investment preferences for international investors. Our studies also show that new incentive systems have emerged, such as providing direct financing to investors, and are preferred by investors.

Today, developed countries are also affected by this competition and take more ambitious steps to attract international investments. The US tax reform at the end of 2017 is one of the most important examples of this. As you know, the USA reduced corporate tax from 35 percent to 21 percent through this tax reform. Although this is seen as a step for the domestic market, it is expected to affect half of the total direct investments in the world in the medium term. Corporate tax reliefs and a tight policy to keep investments within the country in the US led to the achievement of previous profits by American companies. So much so that this tax reform in the USA affected the European Union the most.

When we look at the European investment market, we observe a contraction in parallel with global trends. Europe's global direct investment market share, which was around 50 percent in 2007, declined to 8.4 percent in 2018. One of the main reasons for the sharp decline in investment inflows to Europe in 2018 seems to be the withdrawal of accumulated profits by American companies following the corporate tax cut in the United States.

Another important development affecting FDI is the efficiency of investments. In this respect, we observe that the impacts of an increase in productivity from digitalization on investment decisions gradually increase. In this period where the elements of global competition have changed in production, investors are increasingly turning to countries offering conditions to support their global competitiveness.

In addition to all these developments, there are also some decisive constant criteria for investments, the most important of which are related to financing. Impacts of the abundance, cost and diversity of financing on investments are still considerable today as always. Although the economic slowdown puts pressure on investments in the upcoming period, we believe that the downward trend in interest rates will facilitate the balancing of this contraction and the encouragement of investments.

We believe that the Istanbul Finance Center is an important step taken towards the diversification of the finance resources needed for investments and the strengthening of how investors perceive Turkey.

As YASED, we attach great importance to this project because we foresee that the emergence of Istanbul as a regional and global finance center will support employment, technology and international fund inflows and also increase direct investments. We welcome the actions taken in the areas of “strong human resources”, “technological infrastructure and digitalization” and “regulations and incentive mechanisms" needed for the successful implementation of the project. We also work with relevant institutions on issues such as further increasing the diversity of financial products and services, ensuring the competitiveness of transaction costs, simplifying the tax system, developing the regulatory and supervisory framework, and data security and roaming, and share our suggestions to bring to our country the best practices in other international finance centers.

We, as international investors in Turkey and indeed as Turkey's investors, know the strengths of our country as an investment destination so far and support all efforts in this direction. Our research also supports this belief. Currently, we see that existing investors in our country have a much higher tendency to make new investments than new investors. Investors that are happy and know Turkey well constitute the real and the most powerful references for Turkey. We wholeheartedly believe that the potential of our country is high and it has the power to attract more investment.

However, as I have just mentioned, we now observe investors that set new directions in today's world and strong rivals competing to attract them to their countries. We must rapidly adapt our country to these changing conditions and focus on investments that will make us competitive beyond today and in the economy of tomorrow. We have to achieve this transformation so that our country can continue to attract international direct investments in the long-term so as to meet its financing needs permanently.

As YASED, we are working with our public and private sector stakeholders within the scope of many studies conducted on the investment competitiveness of our country. We assume a leading role in activities such as Turkey's FDI Strategy, the Framework Law of Investments and the identification of priority investment criteria.

Our goal is to make sure that Turkey is among top 10 countries that attract FDI the most. To achieve this, our share in global investments, which is 1 percent today, should increase to 3 percent. Turkey holds this potential, but the way of achieving this potential is to catch up with the global transformation and increase its competitiveness in line with emerging conditions.

We, as YASED, are ready to contribute to the steps that need to be taken by Turkey throughout this process with our experience and the global knowledge of our members."

 


With contributions of Vodafone