Turkey’s government has renewed its appeal to international investors at a moment when foreign direct investment is recovering, but high inflation, expensive financing and regulatory uncertainty still complicate the entry decision. Speaking in Istanbul on October 9, 2026, Trade Minister Ömer Bolat told European business leaders that investors who have not yet established a Turkish presence are “not too late,” presenting the country as a production, logistics and services platform connecting Europe with Asia and the Middle East.
Bolat’s Invitation Reflects a Wider Investment Strategy
Addressing the European International Contractors Association’s general assembly, Bolat said approximately 89,000 foreign-owned companies operate in Turkey and that European investors account for 63 percent of them. He linked that presence to Turkey’s customs union with the European Union, its population of more than 86 million and its established manufacturing base.
The minister’s remarks were aimed particularly at construction, industrial and infrastructure businesses. He highlighted Turkey’s automotive, machinery, cement, glass, ceramics, steel and natural-stone industries, while also inviting European contractors to form partnerships with Turkish companies on projects in Europe and third markets.
According to the Ministry of Trade, Turkish contractors have undertaken 12,900 projects worth a cumulative $570 billion in 139 countries since the sector began expanding internationally in 1972. Engineering News-Record’s 2025 ranking included 49 Turkish companies among the world’s 250 largest international contractors, placing Turkey second by company count behind China. Bolat said 40 percent of the overseas contracts won by Turkish companies in 2025 were in Europe.
That record gives foreign construction and engineering groups several possible entry models. These include establishing a local subsidiary, acquiring a stake in a Turkish contractor, forming a project-specific joint venture or using Turkey as a procurement and technical-services base. The appropriate structure depends on public procurement rules, tax treatment, licensing, liability allocation and the location of the final project.
Bolat also pointed to more than $300 billion of infrastructure investment over the past 23 years. Projects such as the Middle Corridor across Turkey, the Halkalı-Kapıkule railway connection with Europe and the proposed Development Road through Iraq are intended to reinforce the country’s role in regional supply chains. Yet the commercial value of these routes will ultimately depend on border efficiency, railway capacity, customs interoperability and geopolitical conditions, not geography alone.
FDI Is Rising, but the Composition Matters
The invitation comes after an improvement in headline investment figures. Central Bank of the Republic of Türkiye data reported by the Presidency’s Investment and Finance Office show that Turkey attracted $13.1 billion of FDI in 2025, an increase of 12.2 percent from 2024. Treasury and Finance Minister Mehmet Şimşek said inflows excluding real estate reached $10.7 billion, their highest level in a decade.
The Netherlands was the largest recorded source of investment in 2025, with $2.86 billion, followed by Luxembourg at $1.16 billion and Kazakhstan at $1.14 billion. Germany, the United States, France, the United Arab Emirates, Switzerland, the United Kingdom and Ireland were also among the principal sources. Some flows from the Netherlands and Luxembourg may represent investments routed through holding-company jurisdictions, so source-country statistics do not always identify the ultimate owner.
Wholesale and retail trade attracted about $3.05 billion, or 32 percent of sectorally allocated inflows. Manufacturing received approximately $3.02 billion, while information and communications drew $1.31 billion. The near parity between trade and manufacturing is important. Commercial expansion can demonstrate confidence in domestic demand, but greenfield factories, technology facilities and logistics assets generally have a greater long-term effect on productivity, exports and employment.
Turkey’s performance was comparatively resilient. UN Trade and Development, or UNCTAD, estimates that global FDI rose 6 percent to $1.6 trillion in 2025, but growth was concentrated in developed economies and financial flows. Developing economies received just over $901 billion, an increase of only 2 percent, with investment remaining highly concentrated among a small number of destinations.
The Turkish government is seeking more than a cyclical increase. Its 2024-2028 FDI Strategy targets a 1.5 percent share of global FDI and a 12 percent share of flows into Central and Eastern Europe, the Middle East and North Africa by 2028. Priority categories include digital, climate-related, knowledge-intensive and regional-development investment, as well as projects integrated into global value chains.
Market Scale Is Balanced by Macroeconomic Risk
Bolat said Turkey’s annualized exports of goods and services had reached $409 billion by September 2026, while combined external trade amounted to $865 billion. He also cited a $63 billion surplus in services trade and a 2026 services-export target of $128 billion. Tourism, transport, software, health services and contracting help offset the country’s persistent merchandise-trade and energy deficits.
The domestic economy continues to expand, although at a slower rate than its long-term average. The Turkish Statistical Institute, or TurkStat, recorded real GDP growth of 2.3 percent year on year in the second quarter of 2026 and 1.1 percent from the previous quarter after seasonal adjustment. Information and communications value added increased 8.6 percent, industry grew 2.4 percent and construction contracted 1.9 percent. The International Monetary Fund projected 2.9 percent growth for 2026 in its July update.
Inflation remains the principal operational challenge. TurkStat reported annual consumer inflation of 29.73 percent in September 2026, down from 33.29 percent a year earlier but still high enough to complicate salaries, rents, supplier contracts and working-capital planning. The central bank held its one-week repo rate at 37 percent in September and said monetary policy would remain tight until the disinflation process was firmly established.
For a foreign investor, this creates a mixed calculation. Lira-based costs can appear competitive when converted into euros or dollars, but depreciation, rapid wage adjustments and high local financing costs can erase the initial advantage. Project models therefore require multiple exchange-rate and inflation scenarios, careful currency matching between revenue and debt, and contract clauses that specify how prices will be adjusted.
Economic confidence improved to 101.3 in September, according to TurkStat, but industrial production was 1.9 percent lower year on year in August. Those figures suggest that investor decisions should be based on sector-level demand and export prospects rather than broad assumptions about the domestic market.
Incentives and Tax Benefits Require Project-Level Analysis
Bolat promoted the availability of reduced corporate taxation for qualifying investments, but such benefits should not be interpreted as a blanket reduction for every foreign-owned company. Turkey’s standard corporate income tax rate is 25 percent. The effective rate available to an incentivized project depends on its investment certificate, contribution ceiling, eligible expenditure and the period during which the benefit can be used.
Presidential Decision No. 9903, published in May 2025, reorganized the investment-incentive system around technological development, green and digital transformation, regional development and strategically important production. Depending on the project, support may include customs-duty and value-added-tax exemptions on machinery, corporate-tax reductions, employer social-security contribution support, interest assistance or the allocation of investment land.
Changes enacted in July 2025 provide for a 60 percent corporate-tax reduction on qualifying investment income, subject to the approved investment contribution and generally a ten-accounting-period utilization limit for newer certificates. The distinction between a tax-rate reduction and a cash grant is critical. A project without sufficient taxable profit may not realize the theoretical value on the schedule assumed at the approval stage.
Securing an incentive certificate is therefore only one part of the process. Investors must align the application with the intended location, capacity, machinery list, employment plan and financing structure before committing expenditure. Subsequent changes to imported equipment, production scope or implementation timing can affect eligibility. Investment-incentives advisory, legal and tax compliance, and government relations become operational requirements rather than administrative formalities.
Europe, Carbon and Supply-Chain Resilience
Bolat argued that companies now consider resilience alongside production cost. Turkey’s location can support nearshoring into Europe while offering access to the Caucasus, Central Asia, North Africa and the Middle East. The EU remains Turkey’s largest trading partner, and decades of customs-union integration have created dense automotive, machinery, appliance, textile and industrial-input supply chains.
However, access to Europe is becoming more carbon-intensive from a compliance perspective. The EU’s Carbon Border Adjustment Mechanism entered its definitive phase on January 1, 2026. It initially covers cement, iron and steel, aluminium, fertilizers, electricity and hydrogen. European Commission data for the period from late 2023 through mid-2025 identified Turkey as the second-largest source of covered imports by mass, representing roughly 12 percent of the total.
This is particularly relevant because several industries promoted by Bolat are directly exposed. A Turkish plant’s competitiveness will increasingly depend on verified embedded-emissions data, energy sourcing, production technology and the carbon cost faced by the EU importer. Foreign investors considering steel, cement or aluminium projects need carbon accounting and energy strategy incorporated into site selection and capital expenditure decisions.
Regulatory predictability is another factor. The EU’s 2026 economic assessment called for stronger rule of law, more transparent state intervention, greater regulatory independence and more predictable policymaking to improve Turkey’s investment climate. These concerns do not eliminate the business case, but they raise the value of contractual safeguards, compliance systems and sustained regulatory liaison.
What This Means for Foreign Investors
Bolat’s invitation is supported by a large market, deep industrial capabilities, improving FDI inflows and proximity to Europe. It should nevertheless be treated as the beginning of due diligence, not as an investment thesis by itself.
A credible market-entry process must test domestic demand, export economics, competitive intensity and supply-chain exposure at the product level. Company incorporation and corporate structuring must then address ownership, financing, profit repatriation, transfer pricing and potential joint-venture governance. Incentive work should begin before machinery orders or construction commitments are finalized, while legal and tax compliance must account for sector licences, employment rules, customs classifications and environmental obligations.
Export-oriented businesses also require import-export planning for machinery, inputs, rules of origin and EU carbon reporting. Government relations can help investors track regulatory changes and coordinate with ministries, municipalities, industrial zones and permitting authorities. Expo representation may provide a lower-risk way to test distributors, suppliers and customer interest before committing fixed capital. Once an investment proceeds, disciplined project management is needed to keep land acquisition, construction, recruitment, licensing and incentive milestones aligned.
Turkey’s opportunity is therefore real but conditional. Investors most likely to benefit will be those that combine its market scale and industrial ecosystem with careful structuring, realistic macroeconomic assumptions and active management of regulatory, customs and carbon risks.