By Kidera Momoko
ISTAMBUL—In an interview with Nikkei, Turkey’s presidential investment office head Burak Daglioglu noted that the realization of the country’s economic partnership agreement (EPA) with Japan, which is currently in the final stage of negotiations, will boost direct investment [from Japan] by more than 50% in five years or so. He said that [the EPA] will help make Japanese firms less susceptible to sudden changes in regulations and tariffs and expressed hope that it will end up attracting more investment from smaller firms as well.
According to the Investment Office of the Presidency of the Republic of Turkey, about 250 Japanese firms were operating in Turkey as of 2020. Japan’s investment from 2003 to 2020 totaled 4.5 billion dollars (500 billon yen).
In May, Mitsubishi Electric announced plans to ramp up its production of air conditioners by investing 160 million dollars in the country. Ebara also acquired a Turkish pump manufacturer for 180 million dollars before April.
Turkey welcomes these moves. “In our country, local firms and European firms control the market,” said Daglioglu. “Mergers and acquisitions (M&A) would be a logical strategy for Japanese firms to adopt.” The chronic depreciation of the Turkish lira is also helping to boost the corporate buyout trend.
Wariness remains strong among Japanese firms that the Turkish government frequently changes regulations and raises corporate taxes and other duties without notice. Between 2020 and 2021, authorities there imposed additional tariffs on about 5,000 goods, some of which became subject to a duty increase of up to 50%. Daglioglu explained that once the EPA is concluded, Turkey “will be able to give a sense of assurance to smaller Japanese firms as well.”
Daglioglu’s expectations for investment from Japan are driven by the country’s policy emphasis on Asia. “We must attract more investment from Asia,” he said.
Turkey has strong ties with the European Union due to their tariff alliance. The EU controls about 60% of the market. But Asia, including the Middle East and Central Asia, has been steadily increasing its presence. The region’s market share in Turkey doubled to 24% in 2012–2020 from 12% in 2003–2011.
In addition to the ongoing negotiations on the EPA with Japan, Turkey effectuated free trade agreements with South Korea in 2013 and Singapore in 2017. (Abridged)