Global Players from Emerging Markets: Strengthening ... - Unctad

150 Outward Foreign Direct Investment by Enterprises from Turkey
investment opportunities offered by privatizations in
the Balkans and Central Asia. They acquired Stateowned
enterprises in these host countries. The case
studies also highlighted that Turkish firms prefer
majority-owned joint ventures with local partners
initially to minimize uncertainty and start-up costs,
cope with host country bureaucratic obstacles, and to
gain access to superior technology. They eventually
acquired full ownership and control of their foreign
affiliates after having exploited the initial benefits of
joint venture.
Characteristics of OFDI by Turkish SMEs.
According to a survey conducted by the Observatory
of European SMEs, only 3 per cent of SMEs in Europe
had undertaken OFDI; however, there were differences
among countries. 123 Little is known empirically as
to why SMEs choose OFDI and even less is known
about the extent to which they realize their OFDI
objectives. No national data on OFDI by SMEs exist
in Turkey. In fact, no reliable statistics exist on Turkish
SMEs (OECD 2004c). The special services that the
Istanbul Chamber of Industry provides to support its
SME members do not include facilitation of OFDI.
SMEs in Turkey do not receive any specific direct
and proactive support from any public organization
for OFDI. Investment abroad is to a large extent still
regarded with hostility. Nonetheless, despite the lack
of public institutional support, Turkish SMEs invest
abroad to survive, grow and become more competitive.
The Chamber conducts annual surveys on its 11,000
members, of which 98 per cent have fewer than
250 employees, for their planned investments and
the realization of those plans. The surveys revealed
that both large companies and SMEs viewed OFDI
as increasingly critical to their competitiveness and
profitability (Istanbul Sanayi Odasi (ISO) 2005).
The surveys also report that firms had planned to
increase their OFDI by 17 per cent during the first half
of 2004 but only 3 per cent had realized those plans.
In the second half of 2004, 15 per cent had planned to
increase their OFDI but only 4 per cent realized their
plans. As for 2005, 25 per cent of all its members
planned to invest abroad, of which 22 per cent were
small-scale firms. The ISO states that its members find
it increasingly more attractive to invest abroad than
at home due to rising intermediate input prices and
declining profitability in Turkey (ISO 2005). In the
absence of adequate proactive support from the Turkish
Government, the Foreign Economic Relations Board
(DEIK), a private non-profit making Turkish business
association established in 1986, played a major role
in promoting OFDI. 124 The primary objective of
DE�K is to improve Turkey’s international economic
relations through bilateral business councils (BBCs)
123 http://europa.eu.int/comm/enterprise/enterprise_policy/
analysis/doc/smes_observatory_2002_report1_en.pdf.
124 http://www.deik.org.tr/default_eng.asp.
formed between Turkey and countries that have
significant trade and investment ties. DEIK provides
services to Turkish companies that either already
have or intend to develop business relations in the
respective partner countries. The BBCs, which meet
regularly, aim not only to improve the conditions of
existing bilateral trade and investment ties, but also to
provide a forum for the development of new ones by
collecting and exchanging information on potential
business opportunities in and outside Turkey. There
were 67 BBCs operating under DEIK’s umbrella as
of June 2005. Many Turkish companies that are BBC
members are also SMEs.
C. Drivers and motivations
The motivations of Turkish enterprises investing
abroad differ according to size of firms (tables 5
and 6). The relative importance of the factors also
varies across different companies. Liberalization,
unfavourable economic conditions at home and
privatization in neighbouring countries were among
the key drivers (table 6). Saturated home market had
encouraged Turkish enterprises to venture abroad to
diversify risk, improve competitiveness and expand
markets. Other important motivations include access
to new markets, natural resources, technology and
brand names. While cost motive is an important
factor, it is not the overriding reason, particularly
for the efficiency-seeking OFDI. The rise in Turkish
TNCs has been described as belonging to the “second
wave” of third-world TNCs whose “…globalization
is less driven by cost factors per se, but more by a
search for markets and technological innovations to
compete successfully in the global economy” (Yeung
2000).
• Liberalization and improved policy
environment. As the Turkish economy became
more outward-oriented since the 1980s, the
Government started to liberalize the country’s
OFDI regulatory environment. The improved
policy environment played a role driving
Turkish enterprises to go abroad. Competition
at home and from abroad (through imports and
inward FDI) also contributed to encouraging
OFDI. In the nine companies interviewed by
the auhor, liberalization of the home regulatory
environment ranks a priori factor for OFDI.
Along with the liberalization of the foreign
exchange controls, the Turkish foreign trade
regime has also been progressively liberalized,
as a result of both the Uruguay Round and
Turkey’s customs union with the European
Union, allowing much greater competition
from imports. Turkey’s inward FDI regime has
also been liberalized, although not to the same