Turkey expects that more Chinese electric vehicle makers will invest in the country, following BYD’s decision to put USD 1 billion into a factory for EVs and plug-in hybrids, the head of the presidential investment office, Burak Daglioglu, told Nikkei Asia in a recent interview.
“Talks with several Chinese EV companies are going positively,” said Daglioglu when asked about investments by Chinese EV manufacturers, including Chery Automobile and SAIC Motor. “I will not be surprised if we hear positive results in the coming quarters.”
Previously Chery’s local unit, Chery Turkey, and a local MG distributor that is owned by SAIC have announced they are in investment talks with Turkish authorities.
In July, the Turkish government announced part of a package of USD 30 billion in incentives, including grants and tax cuts, for sectors like EVs, batteries, chips, and renewable energy equipment.
Daglioglu expects half of the investments in such high-tech sectors to come directly from foreign investors and their joint ventures with local partners.
He said Ankara is also in talks with other foreign companies for investments in sectors like chemicals, machinery, energy equipment, and food and beverages.” A billion-dollar investment by BYD will give comfort to other investments that everything is now back to normal in terms of macroeconomic indicators.”
Turkey is grappling with the pain of high inflation, which peaked above 75% in May. It dropped to around 62% in July, giving hope that it could be subsiding. A tightening in monetary policy that has been underway since last year, with the central bank raising its main rate to 50% from 8.5%, seems to have taken effect.
President Recep Tayyip Erdogan pressured the bank to cut interest rates despite inflation from 2021 through 2023, leading to a vicious cycle of high inflation and a weak currency. The government has made a U-turn toward orthodox economic and monetary policies following presidential and parliamentary elections in May last year.
Daglioglu said “price stability is a priority” of the government’s economic program adopted in June 2023, which is “cooling down the economy and decreasing inflation,” bringing large portfolio investments and foreign direct investment (FDI) like BYD’s. He added, “Many international foreign direct investors speak very positively and are saying we are on right track.” Markets estimate Turkey’s inflation will drop to around 43% at the end of this year.
He hailed Turkey’s customs union with the European Union, the more than 20 free trade agreements that it has signed with such countries as South Korea, Malaysia, Singapore and Egypt, its strategic location providing access to Europe, Asia, and Africa, its large and young population and its low worker absenteeism rate as all instrumental in attracting FDI.
Ankara targets attracting 1.5% of global FDI inflows by 2028, up from the average of 0.9% in the last two decades. It also aims to boost its FDI share with the CEEMENA countries of Central and Eastern Europe, the Middle East, and North Africa to 12% from 9.8%, competing with regional rivals like Poland, Israel, the Czech Republic, and Egypt.
Turkey attracted USD 10.6 billion in FDI last year, of which USD 3.5 billion was real estate investments by foreigners, according to the central bank.
According to the presidential investment office, Turkey attracted USD 262 billion in FDI between 2003–2023. The share from Asia, excluding the Gulf Cooperation Council, was 9% between 2003–2012 and then rose to 21% between 2013–2023. In the last decade, 63% of FDI came from Europe and 10% from the US.
Turkey started negotiations on an economic partnership agreement with Japan in 2014 but the talks lost momentum, with the last round in 2019. The two countries marked a century of diplomatic relations on August 6, and there is renewed hope that the talks will resume this year.
According to Daglioglu, total investments by Japanese companies are close to USD 4 billion and more than 250 companies, including Toyota Motor, Daikin Industries and Mitsubishi Electric, are active in Turkey. Investments from China are a “little less than USD 3 billion,” he said.
Daglioglu pointed out that annual acquisition deals by Japanese companies in Turkey reached around 10 before the Covid-19 pandemic and said that if an economic partnership agreement is signed, that number could be “easily doubled” and the deal could facilitate the entry of small and medium Japanese enterprises. He hopes to lure high-tech semiconductor, energy, robotics, and automation-related investments from Japan.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.