Turkey’s top investment sectors revealed

Foreign investment dropped slightly last year in Turkey, with US$12.14 billion invested as opposed to $12.70 the previous year. However, investor interest remains strong - and the number of new foreign-funded companies grew last year, with 3833 firms registered in 2014, an increase of 29 percent over the previous year.

Large companies and institutions backed Turkey’s growth, with a World Bank December report claiming that the country “remains a strong target for foreign investment” and Ernst & Young mentioning Turkey’s “enormous market potential” in a report late last year. "Between 2009 and 2013, the number of projects in Turkey increased by 129 percent, and this was accompanied by a 162 percent increase in job creation," the report said.

Let’s have a look at the most popular areas for foreign investment:

Dairy

Turkey’s domestic dairy market is tipped to grow from €5.2 billion in 2013 to €9.7 billion in 2018, according to a 2014 report by Rabobank analyst Matthew Johnson. Increasing urbanisation and growing disposable incomes means that sales of locally branded products have increased, with 65 percent of dairy product sales coming from small producers, but there is room for growth and brand consolidation.

Dairy consumption in Turkey is around a third of what it is in other EU countries, but with a little marketing this proportion will grow.

Top investor: The European Bank for Reconstruction and Development bought a stake in Turkish dairy producer Yorsan last year.

Pensions

Before 2013 Turkey’s pension industry was not only small, but mostly off limits to foreign asset management companies. However, an overhaul of the law that governed pensions two years ago saw the state begin to make contributions to private pension schemes, in order to help bolster savings. The result was a 50 percent jump in the number of people who joined pension schemes.

Pension contributions are still relatively low, accounting for just three percent of the deposit market, but the pension industry is tipped for growth. A report from consultancy Oliver Wyman, published at the end of last year, said that the impact pension reform has not been fully realised, and high growth is expected. The report stated that the pensions industry will likely grow to around 25 percent of the size bank deposits by 2018.

Top investors: A number of foreign banks have already invested in the pension sector, but there is still scope for new investment in Turkey.

Gold

Turkey’s mining sector has always been strong, and now foreign investment is injecting further interest into the industry. Turkish mining projects attracted $446 million of foreign direct investment between January and October last year, an increase of 114 over the previous year.

Mining expert Paul Mansouri from Dubai’s Norton Rose Fulbright law firm explained that Turkey’s “highly varied geology” was of huge benefit to the country. “Turkey  holds 2.5 percent of the world’s industrial mineral resources and produces some 50 different metals and minerals that are commercially viable for exploitation.”

Steady commodity prices and favourable new mining laws have resulted in an increase in mining and mineral exploration, Mansouri said.

Copper, gold, nickel and zinc are at the forefront of industry growth, and Turkey is the leading producer of gold in Europe, with some of the world’s biggest gold deposits, reserves of 800 tonnes and predicted resources of 5700 tonnes. There are currently seven active gold mines within the country.

Automotives

Turkey is now one of 17 countries producing more than a million vehicles a year. In terms of production, Turkey is the 15th largest in the world and the fifth largest in Europe. It’s the ninth largest commercial vehicle producer in the world, and the second largest in Europe. It’s also the number one bus manufacturer in Europe. The automotive sector was the largest contributor to overseas sales last year, generating more than $22 billion in sales.

It’s easy to see why foreign investors are focussing on this sector, and since the beginning of the 90s incentives attracting foreign investment have been rolled out, such as easing the importing of technology and promoting foreign capital partnerships. The result has been striking, with foreign investment allowing Turkey to extend its reach to almost every corner of the globe.

Top investor: There are 256 foreign-financed companies involved in Turkey’s automotive sector. In January, Toyota announced a top-up investment of $500 million in Turkish automotives.

Shopping malls

Turkey’s first shopping mall was built in 1988. The concept took off - and now the shopping mall sector is one of the largest in the country. Turkey has the second highest number of shopping malls in Europe, and enjoyed a turnover of $19.3 billion dollars in 2013.

Foreign investment interest from funds, banks and individuals is huge, and ongoing, with plenty of room for growth. Turkey’s youth market is strong and relatively untapped, and there are 17 Turkish cities with populations of more than one million. While the largest cities Istanbul and Ankara have almost reached saturation in terms of shopping centre growth, there is still plenty of scope for movement.

Top investor: Private equity company Blackstone Group became Turkey’s largest owner of shopping centres in October with the acquisition of Multi Corp, a Netherlands-based developer, for $687 million.

Sunny future

Turkey continues to lure investors seeking a safe haven. While the rest of the world navigates the stormy waters of continuing financial strife, Turkey’s economy remains strong.

Ernst & Young stated that while foreign direct investment dropped in many countries, Turkey was “a clear exception to this decline.”