KPMG News and Events
Playing a long game: A study of the foreign investment plans of Turkish businesses between 2009 and 2014
The most popular country for Turkish businesses wanting to invest abroad both now and for the next five years is Russia, a new survey from KPMG, “Playing a long game, a study of the foreign investment plans of Turkish businesses between 2009 and 2014”, has found.
- European countries giving way to Asia, Africa, Middle East as places to invest
- Turkish businesses look to play key role between Europe and rest of world
- This year, Russia is due to receive 30 percent of Turkish private foreign investment. Looking ahead five years, Russia is the choice of 14 percent, making it a most preferred alternative among investors.
Second for investment this year is Germany, chosen by 18 percent. But Germany is falling out of fashion as a place to invest.
If we look a year ahead, Germany falls to joint third alternative for investment, behind France, Egypt, Iraq, Romania and Libya and alongside the UK.
These figures come from “Playing a long game”, a new study from KPMG in Turkey examining the foreign investment plans of Turkish businesses now and in the next five years.
The study finds that Turkish investors are moving away from the established economies of the EU and are looking instead at the emerging economies of Eastern Europe, North Africa and the Middle East.
Although the UK and Germany do feature strongly in investment plans for five years ahead, it is Azerbaijan, the United Arab Emirates, Libya and Algeria which will take the bulk of future Turkish investments.
“This seems to be a uniquely Turkish pattern of investment.” said Ferruh Tunc, Chairman and Senior Partner of KPMG in Turkey.
“In similar surveys carried out in other parts of the world, we have found that the most common pattern among international investors is to have a relatively large investment in the US, but to have plans to reduce this in favour of increased investments in China, India and to some extent in Europe.
“But Turkish investors are clearly focused on developing links with countries immediately to the East and the South. Given Turkey’s pivotal position between these economies and those of Europe, and the country’s aspiration to become part of the EU, it looks very much as if the Turkish business is setting itself up to be a key link between Asia, Africa and Europe.”
This idea is supported by the finding that Turkish businesses are much less concerned about the effect of political instability than businesses elsewhere in the world, but are much more concerned about the effect of foreign tax systems.
Joint ventures, which is one of the most common patterns of foreign investment as named in the foreign surveys, were chosen by only 16 percent of respondents as their preferred method of investing.
Much more popular, chosen by 44 percent, was the option of holding investments in a branch or subsidiary of a Turkish holding.
“The tax structure is becoming a key consideration in planning foreign investments as the Turkish tax system develops,” said Mr Tunc.
The Tax Code of 2006 introduced new Controlled Foreign Company, Transfer Pricing rules and special holding regime for foreign participations which designed to update the taxation of income earned by Turkish companies abroad. This may lead Turkish companies to review their view of the most efficient structure for their foreign investments.
“Nevertheless, the strategy of Turkish business executives seems to be to build reliable business relations abroad now which will potentially be of great value in future economic exchanges between Europe and the rest of the world. Consequently, we can say that they are indeed playing a long game.”
KPMG’s research was carried out among 50 senior Turkish corporate decision makers, mainly Chief Executive Officers and Chief Financial Officers, representing a wide range of sectors. The annual global turnover of their companies ranged from 100m Lira to 500m Lira. In telephone interviews conducted during August and September, these executives were asked where they choose to locate their businesses, what affects their decisions on location, where they expect to be investing in the next year and where in five years’ time.
The report of the research “Playing a long game, a study of the foreign investment plans of Turkish businesses between 2009 and 2014” was launched at KPMG’s Global International Corporate Tax Turkish Conference, “Thinking beyond 2009: Challenges and opportunities for Turkey”, a conference involving over 150 delegates and speakers from business and government in Turkey, which took place in Istanbul on October 21 2009.
The report can be downloaded here
© 2010 Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ, the Turkish member firm of KPMG International, a Swiss cooperative. All rights reserved.
