EXAMINING OF THE FOREIGN DIRECT INVESTMENTS IN INDUSTRIAL SECTOR AND SUBSECTORS HAVE EXPORT-LED OR IMPORT-SUBSTITUTING MOTIVE IN TURKEY

Abstract

This study was aimed that discuss the affections of FDI on the industrial sector and its subsectors in the case of the Turkish economy. For this purpose, in this study, the import and export of Turkey’s industrial goods and industrial subsector goods have been employed as dependent variables. Total foreign direct investment (FDI) in the industrial sector and its subsectors have been used as independent variables. As for control variables, national incomes of OECD-member countries have been used for exports as representative of the real exchange rate and foreign national incomes, and Turkey’s national income and real exchange rates have been used for imports. The study period was considered as 2005: Q1-2019: Q2 and analyzes were made by using the ARDL method.  It was determined that the FDI inflow into the industrial sector in Turkey had the export-supporting effect, though at a weak level. Out of the 16 industrial subsectors with FDI inflow, it was determined that the inflows had an export-supporting effect in 3 subsectors and also an import-substituting effect in one of these 3 subsectors. It was observed that the import-substituting effect was prominent in 2 subsectors, whereas import-deepening effects were observed in 1 subsector. In other subsectors, the FDI played no role; in other words, it remained neutral. Despite the FDI inflow supporting exports from a general perspective, it can be stated that this capital inflow has weak effects. It can be concluded that a radical change is necessary for the structure of the Turkish economy.