Development and determinants of foreign direct investment in Turkey: a comperative analysis with the EU countries

Abstract

The main purpose of this study is to investigate the nature of FDI inflows into the economy of Turkey, to analyze its development and various economic determinants, which govern its levels and performances. For this purpose, we have firstly to examine exact reasons for comparably low level of FDI in Turkey and secondly compare determinants of FDI in other EU Members & Candidates in order to discover essential steps to be taken. For this purpose, an FDI development analysis is made in the second chapter, and a comparative analysis between Turkey and EU Members & Candidates is completed in the third chapter. The research indicates that political and economic instability, weakness of legal framework, insufficient administration system, and corruption have been the major problems that prevent favorable investment climate, thus, attracting large amount of foreign direct investment. The lack of transparency in the financial statements and resistance to adopt the international accounting standards stand as the most important impediments in the microeconomic scope. The increasing FDI by 2005 is considered to be closely linked with the European Union process of Turkey and the well functioning privatization program.