Turkey not attracting enough foreign investment

A new CEPS study analyses the reasons for low FDI in Turkey and recommends fast integration into the EU.

Turkey is the world’s seventh largest emerging economy and the European Union’s sixth biggest trading partner, yet it is under-performing relative to Central and East European countries in attracting foreign direct investment (FDI), says a new working paper published by a Brussels-based Centre for European Policy Studies (


The CEPS study believes that this is partly due to political and economic instability, reflected in chronic inflation and negative government attitudes towards foreign investment.

On the other hand, Turkey has a strong competitive position in relation to the economic determinants of investment location. It is well placed compared to competitor locations due to its economic size and dynamism and quality of its labour force, says CEPS.

The study argues that the IMF agreement and EU candidate status are vital pre-conditions rather than just advantages for attracting FDI into Turkey. Turkey will suffer the erosion in its competitive position as a location for FDI when the CEECs join the EU, says CEPS.

The study recommends that Turkey should strive for greater political and economic stability in order to reduce inflation and make progress in privatisation. It proposes that Turkey should join the Single European Market before it joins the EU, which would remove many obstacles to FDI.

CEPS recommends the same for the other candidate countries that do not join the EU in the first wave. The study urges the EU to facilitate the enlargement process as quickly as possible for Turkey and the Central and Eastern European countries.

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