Europe’s entrepreneurs are convinced of the merits of Turkish accession to the EU even though EU politicians and voters are not, observe Katinka Barysch and Rainer Hermann in a June 2007 essay for the Centre for European Reform (CER).
European business is showing its confidence in the fast-growing Turkish economy by investing billions there, in the expectation that the prospect of EU accession will continue to change the country for the better, observe the authors.
Annual foreign direct investment (FDI) in Turkey reached $20 billion in 2006, and European small and medium-sized enterprises are now following the big multinationals’ lead and investing in the country, remarks the CER paper. EU member states account for 60% of the FDI in Turkey, it adds – and investor confidence continues to rise.
Meanwhile, the authors claim that although Turkey’s path towards EU membership has been “neither straightforward nor smooth”, it has brought “clear economic benefits”, such as a tripling of EU exports to Turkey to $58 billion a year, while Turkish exports to the EU have quadrupled to $48 billion. The EU is Turkey’s biggest trading partner, they add.
Barysch and Hermann claim that given the growing stake that EU business has in the Turkish economy – considering it to be “one of Europe’s most exciting markets” – “it is surprising that so few businesspeople are prepared to speak out in favour of Turkish membership of the EU.”
The CER paper outlines a number of factors which make Turkey attractive to foreign investors:
- Its fast-growing domestic market.
- Its strategic location between Europe, Asia and the Middle East.
- Its low-cost labour, with continued migration from rural areas keeping salaries down.
The authors believe that the EU accession process will continue to “make life easier” for foreign business on the ground, with two-thirds of the chapters of EU law that Turkey must adopt related to the economy – thus serving to improve the regulatory environment and create new business opportunities.
The CER paper suggests several ways that EU businesses contribute to making the accession process a success:
- Creating jobs and sustaining growth: foreign investment helps Turkey make the transition from an agricultural to a high-quality manufacturing and services economy.
- Lobbying for reform and explaining the EU: companies remind the government and people of Turkey of the huge benefits of EU membership, and lobby for structural and regulatory changes to the economy.
- Acting as a pro-Turkish voice in the EU: European multinationals and industry federations are an important voice in the wider debate about Turkey.
The paper concludes by stating that the voice of European business is needed if Turkey’s accession process is to be sustained, urging business leaders to speak out openly in favour of accession.