ANKARA
Turkey has become the tenth most attractive foreign direct investment (FDI) destination in Europe in 2014, global consultancy firm Ernst & Young said in a report released on Wednesday.
"Turkey has developed into a manufacturing hot spot, particularly for the automotive sector. It has enormous market potential, skilled workforces, and improving business conditions," according to the report entitled "E&Y's attractiveness survey - Europe 2014".
Between 2009 and 2013, the number of projects in Turkey increased by 129 percent, the report said, and this was accompanied by a 162 percent increase in job creation.
"Although Poland and the Czech Republic were voted the most attractive CEE [Central and Eastern Europe] countries, their overall attractiveness scores declined by six and four percentage points respectively. They are losing out to economies further east, such as Turkey (which is up four points) and Romania (up two points)," the report said.
Turkey had a successful year in 2013, with 98 projects started (up from 95 in 2012). FDI projects in the business services sector also increased by more than three times in Turkey, albeit from a low base, the report said.
"Affirming itself as Europe’s new hot spot for large manufacturing projects, the country drew several large investments in the automotive sector. The U.S. and Germany remain the two largest investors in Turkey, accounting for 24 percent and 16 percent respectively," said the report.
Between 2009 and 2013, Turkey attracted 41 automotive FDI projects, the report said.
"Automotive companies have established manufacturing facilities and assembly plants in Turkey in order to serve both the domestic and export markets (in 2013, over 70 percent of total automotive production in the country was exported). And the government’s special incentive schemes, which offer tax and duties exemptions for investments in R&D, have helped establish Turkey as a promising location for new R&D centers," the report said.
In the past decade, automakers have shifted three million units of production capacity to eastern Europe and Turkey in order to gain a cost advantage, according to the report.
Labor issues could affect the flow of FDI. Since May 20, a number of Turkey's automotive producers have been hit by strikes, with workers seeking increased pay. The factories of Renault, Fiat and Ford in Turkey have been forced to halt production several times in May. Several auto parts manufacturers have also been hit by strikes.
