Ömer Cihad Vardan, President, Foreign Economic Relations Board of Turkey ( DEİK): Interview

Interview: Ömer Cihad Vardan

How will DE K’s new role aid efforts to attract foreign direct investment (FDI) and cultivate business?

ÖMER CIHAD VARDAN: In September 2014 the Grand National Assembly voted to restructure DE K, which will continue to support the integration of Turkish industry through trade and investment relations. Operations were streamlined within the organisation. The offices of the president and the prime minister provide increased support, and our priority is to increase the capacity and effectiveness of foreign trade relations. We want to see Turkey emerge as a transcontinental business destination for multinational corporations. To help us in that direction we are concentrating on exporting services, as well as goods. We will also establish new business councils and launch business development projects.

We are revamping our investment promotion strategy with a two-pronged approach. First, we are setting sector-specific investment targets. Attracting foreign capital is an increasingly competitive endeavour, so we need to send a clear message to investors and show them that Turkey is ready for higher levels of investment. While we are shifting our focus to new sectors, we will not stray too far from the industrial manufacturing base, where we have created attractive incentives. Second, we are diversifying the global spectrum of our foreign investors. Currently, 70% of FDI comes from the EU. This needs to be balanced across other parts of the globe to protect Turkey from economic shocks from the EU. Thus far, we have not been successful at attracting investment from new and emerging markets like the GCC, China and Latin America, but we believe we can raise investment from these regions.

To what extent will the US Federal Reserve’s tighter monetary policy pose a risk to investment in Turkey?

VARDAN: Tapering is a process which has been affecting not only Turkey but a number of countries around the world, particularly the developing ones. On the other hand, it is important to underline that Turkey’s main focus in terms of capital flows in the following years will be FDI, rather than short-term inflows. This kind of long-term investment looks for two main properties in a candidate economy: stability and growth potential. Turkey, with its ongoing macroeconomic and political stability – and its demographic and geopolitical advantages for growth – will therefore still be an attractive destination for global investors.

At this point, the economic restructuring package recently announced by the government should also be emphasised as the path to the transformation of the Turkish economy. In that regard, one of the central goals of economic and industrial restructuring is to see Turkey become a technology-exporting country and, generally, export higher-value-added goods in addition to services. In light of this, the importance of the Transatlantic Trade and Investment Partnership (TTIP) should be noted. When completed, the TTIP will see an astonishing one-third of global trade volumes fall under its umbrella. The benefits of this cannot be stressed enough. Though not part of the EU, Turkey is a member of the Customs union, and will surely be a participant in the partnership, whether through the insertion of a set of special clauses, or separate free-trade agreements with the US. In any case, the economic benefits expected to come Turkey’s way are significant.

To what extent is foreign capital inflow important for fuelling Turkey’s GDP growth?

VARDAN: The new norm of the global economy is moderate growth. In such a world, where external adversities are reflected on its economic performance, Turkey still manages to grow at a pace of 3-4%. What it needs in the years to come will be a sustainable, quality growth pattern supported by investment. So capital inflows will matter not only for acceleration through investment and trade, but also for further technological development. Foreign capital inflows will also help finance the current account deficit, which has been in a downward trend and is expected to be reduced to more reasonable levels through certain structural improvements.