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

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160 Outward Foreign Direct Investment by Enterprises <strong>from</strong> 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 <strong>from</strong> 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
a wide range of services, such as export promotion, to SMEs should expand to include provision of not only information on the Internet but also individual and customized advice on OFDI opportunities and ways to realize those opportunities. The Chambers of Industry should also do the same and promote a better understanding of internationalization of enterprises through OFDI, including the challenges and how such internationalization process can help improve enterprise competitiveness. The Turkish Government should also channel the required resources into the collection and analysis of the data on OFDI activities of Turkish enterprises so that both academic and policy questions on the causes and effects of OFDI can be better answered. Given that OFDI is becoming an increasingly important phenomenon relative to total economic activity in Turkey, the Government could consider allocating resources for studying the causes and effects CHAPTER XII 161 of OFDI, especially by SMEs. The starting point for this could be the formation of a reliable database on OFDI by SMEs. The requirement for Turkish OFDI to be authorized by the Turkish Treasury could be removed, especially when such authorization requirement has been recently abolished for inward investment. The Treasury could consider more effective ways of collecting data on the financial and operational activities of Turkish affiliates abroad. Turkey does not yet have an investment promotion agency (IPA) for either inward or outward FDI. An Investor Relations Office (IRO), established in the Turkish Treasury, provides timely and useful macroeconomic information for investing in Turkey and abroad. If an IPA were to be established, it could also serve as a catalyst for OFDI, especially by SMEs, in providing information and enabling contacts between Turkish and foreign enterprises.
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United Nations Conference on Trade
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Preface The landscape of internatio
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Global Players from Emerging Markets: Strengthening ... - Unctad

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