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

160 Outward Foreign Direct Investment by Enterprises from Turkey
firms investing overseas. About $2.2 billion in credits
and guarantee facilities provided in 1989-2004 by the
bank supported Turkish OFDI in 21 countries, mostly
in the Balkans, Eastern Europe and Central Asia.
Since 1996, Turk Eximbank has provided finance to
Turkish OFDI projects in shopping malls and chain
stores through the Overseas Chain Stores Investment
Credit Program. It extended this program in 2003
to investments for establishing Turkish brands and
promoting Turkish designer goods abroad, with a
minimum fixed investment of $200,000 and a lending
ratio of 85 per cent of the invested amount. The bank
has considered implementing an Overseas Investment
Insurance Program to provide insurance cover to
Turkish OFDI against political risks. 131
Turkish embassies and consulates in the host
countries of the companies surveyed were helpful
in providing information and intermediation to the
enterprises in their initial stage of OFDI to the host
countries. The customs union with the EU in 1996
and prospect of full EU membership have created
opportunities for Turkish SMEs to undertake OFDI
to the neighbouring countries in the region. Ankara
European Information Center (AEIC) 132 , financially
supported by the European Commission, provides
a platform for Turkish SMEs and EU enterprises
interested in starting joint ventures in either Turkey
or the EU to make contact with each other. On AEIC’s
website, Turkish SMEs can search for the profiles
of EU enterprises that are potential joint venture
partners. 133
F. Conclusion
This study analyzed the trends, causes, policy
consideration and effects of OFDI by Turkish firms
on enterprise competitiveness. The emphasis has
been on SMEs. Most Turkish firms that have invested
in the neighbouring countries are SMEs, although
large enterprises such as Koc Holding and Sabanci
Holding account for most of the total value of OFDI
transactions. The motives of large enterprises are
mainly strategic and relate to long-term investment
planning. However, those of SMEs are entrepreneurial,
innovative, idiosyncratic and opportunistic. They
invest abroad to exploit unique circumstances, to
stay competitive and to survive in light of challenges
they face in the domestic market environment. The
drivers and motivations of OFDI vary between firms,
131 http://www.eximbank.gov.tr/html_files/kisaeximbankpg.htm.
132 AEIC was founded in 2002. It is a joint project of the Small
and Medium Industry Development Organization (KOSGEB) of
the Ministry of Industry and Trade and the Ankara Chambers of
Commerce and Industry.
133 http://www.abmankara.gov.tr/default.asp.
and between Turkish SMEs and large TNCs. The
key drivers appear to be liberalization of the home
regulatory environment, constraints of home market,
fiscal motivations and access to markets. High taxes,
rising unit labour costs and trade supporting motives
encouraged OFDI. Access to technologies, brand
names and natural resources also played a significant
role. Large Turkish construction companies have
significant investment abroad. They paved the way in
the 1970s for the rest of the Turkish private sector to
enter international markets, first as exporters and later
as direct investors. This process accelerated in the
early 1990s, following the collapse of the USSR and
the communist regimes in the Balkans, which acted
as a powerful pull factor for Turkish OFDI.
Turkish enterprises, as later comers, have used
different linkages, such as joint venture and original
equipment manufacturer (OEM) relationship, with
foreign enterprises in initiating and expanding their
OFDI activities. Joint ventures appear to have been
a common mode of entry to minimize risk and to
access technologies of foreign partners. Both large
enterprises (e.g. Koc Holding and Sabanci Holding)
and SMEs used OFDI as a source of cumulative
learning process (Johanson and Vahlne 2003).
Evidence from the nine case studies conducted
suggests that OFDI has strengthened the competitiveness
of Turkish enterprises in different ways.
Geographical diversification against systemic and
specific risks, and market access have benefited
Turkish firms both in terms of economies of scale and
improvement in quality standards of products and
services. Access to technologies and brands benefited
the large enterprises as it did for SMEs. For some
SMEs, OFDI is seen not just as a means to improve
competitiveness, but to ensure survival in light of
home market environment, mounting competition
and economic crises.
There is widespread concern in Turkey about
OFDI. However, any effort to avoid delocalization
should address the problems SMEs face in investing
and growing at home. To the extent that OFDI
increases the competitiveness of Turkish enterprises,
the Turkish Government could consider facilitating
OFDI as a step to improve the international
competitiveness of both large Turkish enterprises
and SMEs. The government agencies responsible
for helping the formation and development of SMEs
could add OFDI facilitation measures to their portfolio
of services for SMEs. The Government can play
a much more significant role in facilitating OFDI,
especially by SMEs. The establishment of an Overseas
Investment Insurance Program under the aegis of
the Turk Eximbank would be another important
step. The responsibilities of the Small and Medium
Industry Development Organization (KOSGEB) of
the Ministry of Industry and Trade, which provides