Turkeyâ€™s dynamic economy is a complex mix of modern industry and commerce, along with a traditional agriculture sector that still accounts for more than 35 per cent of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport and communication. The largest industrial sector is textiles and clothing, which accounts for one third of industrial employment. It faces stiff competition in international markets with the end of the global quota system. However, other sectors, notably the automotive and electronics industries, are of rising importance in Turkeyâ€™s export mix.
For many years real GNP growth has exceeded 6 per cent. The economy is turning around with the implementation of economic reforms, and 2004 GDP growth reached 9 per cent, followed by roughly 5 per cent annual growth in 2005-06. Inflation fell to 7.7 per cent in 2005, a 30-year low. The country showed strong economic gains in 2002-06, which were largely due to renewed investor interest in emerging markets. Before 2005 FDI in turkey was less than a $1 billion (Â£515.39 million) annually, but further economic and judicial reforms and prospective EU membership are expected to help boost FDI.
Privatisation sales are currently approaching $21 billion (Â£10.8 billion). Oil has been flowing through the Baku-Tblisi-Ceyhan pipeline since May 2006, marking a major milestone that will bring up to 1 billion barrels per day from the Caspian to market. Without a doubt, the commitment of the government to economic reform, supported by prudent macroeconomic and structural policies, has played a significant role in strengthening investor confidence in the Turkish economy.
Foreign Direct Investment (FDI)
FDI in Turkey is rapidly increasing as a result of the Turkish government working consistently hard to make investment both easier and more attractive. As a result of the governmentâ€™sefforts, between January and October in 2006 alone almost $16 billion (Â£8.2 billion) was committed to Turkey in the form of FDI.
Money is flowing into everything from banking to manufacturing and one particular sector where FDI has reached record levels is the real estate sector. A number of significant, international property companies such as Emaar Properties and ETA Star have committed millions to housing and commercial property projects in Turkey, and, going in to 2007, bidding is taking place for a range of new projects such as the biggest real estate project to date in Istanbul for the construction of three skyscrapers and a yacht marina. Donald Trump is said to be in the bidding war for the development that will be constructed in Zeytinburnu.
But Istanbul isnâ€™t the only area to be boosted by FDI; there is a great deal of investor focus beginning to target the southern Turkish coastline, which has a hugely successful tourism industry already, and all of this investment confidence and contribution is allowing for the creation of jobs, which means that local purchasing power is significantly improving.