THE IMPORTANCE OF TURKEY'S FOREIGN DIRECT INVESTMENT FOR ECONOMIC DEVELOPMENT (DFCI), PROBLEMS AND PROPOSED SOLUTIONS

Abstract

While rapid changes in the world change the economic, social and cultural preferences of people in different geographies, they
lead the developing countries to fundamental changes in economic, social and political fields, as well. One of the vital factors
giving pave to this radical change is foreign direct investment. Foreign direct investment, which is one of the main factors of growth and development in developing countries, provides many
advantages to the host countries if it is properly managed.
Foreign direct investment contributes significantly to the host countries in terms of economic and social development. These
advantages can be explained as following; efficient use of natural resources, adoption of total quality management in production
and management, reduction of inflation, increase in employment, transfer of new technologies, increase of exports and meet of
foreign trade deficit, provision of foreign exchange input, gaining importance of brand and company culture.
Foreign direct investment gives rise to significant problems as well as benefits to host countries. These problems can be
expressed as taking the foreign investors' earnings out of the country, foreign companies putting economic and political pressure
on the management of the host countries, weakening the national values and security system, withdrawing the domestic
producers from the market and weakening the competitiveness of the capital.
Foreign direct investment is an important source of economic growth in developing countries; however, in some countries
foreign direct investment remains very low. The political, legal and economic situation of the host country may not always be
appropriate for foreign investors. One of these countries is Turkey. From the establishment of the Republic to 1980s, a closed
economy model in Turkey was effective. During this period, when compared to other countries, though there was relatively
small amount of foreign direct investment flow, various economic, politic and legal obstacles blocked capital inflow in Turkey.
However, after 1980s, with the help of open economic policy, Turkey attained a considerable achievement in direct foreign
investment flow. Today, many multinational companies have already had substantial investments in Turkey.
In this study, the contribution of foreign direct investment to Turkey's economic development, obstacles faced in capital
inflows and causes and consequences have been analyzed.