Arda Ermut, the President of the Republic of Turkey Investment Support and Promotion Agency says that the International Direct Investment amount attracted by Turkey with the new generation structural transformation programs which are planned to be realized until 2018 will increase to USD 20 billion at first step. Turkey realized the structural reforms following the crisis in 2001 and has achieved a potential in terms of international direct investment (IDI) thanks to these reforms which have been implemented successfully in time. Through reforms, Turkey has established an investor-friendly business environment and at this point, it has achieved an IDI attraction capacity of over USD 10 billion per year. Arda Ermut emphasises that this potential will increase until 2018 and that the region’s economic size, young and dynamic population, growing middle class; the country’s economy having stable macro balances and the impact of the network established by international investors who already made an investment will increase the IDI attraction capacity of Turkey to higher levels. When you evaluate the Turkish economy in terms of macroeconomics, what can you say about its current state and the potential for direct foreign investment? Turkey needed to put a comprehensive macroeconomic reform program on the agenda following the crisis in 2001 and started to realize the included reforms after 2002 in such a way that they would complement each other. In Turkey which has natural advantages such as the geostrategic location and economic dynamics which may trigger growth, international direct investments (IDI) showed a poor performance until 2002. However, after the aforementioned program, it came to the forefront as one of the areas where important reforms were being realized. Through reforms, Turkey has established an investor-friendly business environment and at this point, it has achieved an IDI attraction capacity of over USD 10 billion per year. Considering that total IDI attracted before 2002 was USD 15 billion, we can say that Turkey has made a significant progress in this regard. In addition to this, it is a fact that Turkey still fails to realize its full potential in terms of IDI. The region’s economic size, its young and dynamic population, a growing middle class; the country’s economy having stable macro balances and the impact of the network established by international investors who already made an investment increase the IDI attraction capacity of Turkey to higher levels. This potential makes us believe that IDI amount attracted by Turkey with the new generation structural transformation programs which are planned to be realized until 2018 will increase to USD 20 billion at first step. How did the global crisis affect direct foreign investments in Turkey? Can you evaluate the last two years in figure? Before the global financial crisis in 2008-2009, IDI volume was in an increase trend in almost every region and across the world. In 2008, total IDI flow across the world tripled compared to 2002 and reached USD 1.9 trillion. However, upon the outbreak of the 2008-2009 global financial crisis, which seriously affected world economies, direct investments started to decrease. The most important outcome separating the post- and pre-crisis periods was that the total volume decreased in an instant and that the upward trend during the pre-crisis period could not be sustained. Moreover, fluctuations were observed in IDI volume and downward trend was noticed in West Asia and European regions. Despite this conjuncture, IDI inflows to Turkey recovered swiftly during the postcrisis period and Turkey became one of the countries in which the most significant increase was observed compared to its trough level. While there were no indications of recovery especially in West Asia and Europe, Turkey could attract IDI consistently and this demonstrated that the international investors continued to trust the economy and potential of the country. General tendency did not change in 2014 either. It is estimated that the global IDI share will continue to decrease in 2014 and reduce to USD 1.26 trillion from USD 1.4 trillion. Due to the political uncertainties and tension within the West Asia region where Turkey is located, IDI exports to this region are expected to decrease significantly. It is a positive improvement that Turkey slightly increased the IDI volume imported compared to 2013 and kept this value above its long term average. What are your expectations for the upcoming 5 years considering the global conjuncture? Both advanced and emerging economies are still trying to share the legacy of the 2008-2009 global financial crisis. However, we cannot speak of a “positive legacy” in this regard. The global financial crisis led to issues such as the decrease of economic growth, increase of unemployment and country risks and slowing down of the global trade. Decrease of the IDI trends is the natural outcome of this negative situation. From this viewpoint, I believe that developed countries in particular have the potential to receive the biggest share from this legacy since these countries have lost their influence as both an IDI resource and an IDI receiver compared to the pre-crisis period. Contrary to this, Far East Asian countries continue to recover swiftly in the post crisis period. We are of the opinion that this trend will continue in the upcoming five-year period and that the Far East Asian countries, especially China, will reach an important position as an IDI resource and IDI receiver. What are the industries which attract a significant amount of direct foreign investments to Turkey? Is there any industry that becomes prominent? The amount of IDI inflows into the country has increased considerably since 2002 and the industries attracting IDI have changed. For instance, 71%, 18% and 9% of the IDI inflows to our country during 2002-2010 were for service, production and energy industries, respectively. After 2011, the share of the production and energy industries increased to 28%, and 21% respectively, whereas the service industry decreased to 48%. Production of computer, electric-electronic and optical products and production of chemical substances stand out in the production industry. An increase in the share of production and energy industries is important in terms of improving the position of our country in the global value chain and decreasing the dependency of our country on imports. How would you evaluate the energy, real estate and health industries in terms of direct foreign investment? First of all I have to emphasize that, we care about every international investment in our country regardless of its size and industry and we make the best of every opportunity to realize these investments. The reason for this is that the international investments not only encourage financial capital inflow into the country, but also provide added value to our economy with the multiplier effect. More importantly, this demonstrates the trust in the investment environment in the country and sets the grounds for future investments. In this regard, the industries you specified are very important in terms of both their sizes and their returns to the investment environment of our country. To give an example regarding the energy industry, the TANAP project alone is expected to provide an added value of more than USD 50 billion to the economy. In this project, 1.3 million tons of steel pipes of USD 1.5 billion will be used and 1.1 million tons of this amount will be produced in Turkey. Moreover, the line which will pass through 19 provinces is expected to provide employment to approximately 15,000 people. TANAP and other similar energy projects will also provide a direct contribution to the security of current and future energy supply of our country and strengthen the access to the energy resources which are the main elements of the investments. Moreover, this kind of project strengthens the position of the “safe energy transition center” of our country and helps the country to become a real energy base. Similar situations apply to the real estate and health industries. Turkey has leapt forward in R&D and innovation areas, especially in recent years. What kind of actions are taken in the RoT Prime Ministry Investment Support and Promotion Agency in this regard? In order for our country to reach the 2023 goals, it is important to achieve a high added value production capacity. For this purpose, our new generation reform programs include important actions to increase and popularize the R&D and innovation activities. Our agency is assigned directly for the attracting the R&D focused international investments to our country. In RoT Prime Ministry Investment Support and Promotion Agency, we use every opportunity to introduce the investment environment, qualified and educated human resources pool, R&D ecosystem and incentives for R&D activities in our country to the international investors. On the other hand, we bring together the leading domestic companies working to improve their R&D activities with the international investors and companies, and we strive for forming partnerships that will contribute to the economy of the country.