WHY INVEST IN TURKEY?

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WHY INVEST IN TURKEY? 16.05.2017

10 Reasons to Invest in Turkey

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Robust Economy

Opportunities Domestic market + EU

Strategic Location

Benign R&D Ecosystem

Favorable Demographics

Lucrative Incentives

Liberal Investment Climate

Skilled & Cost-competitive Labor Force

OPEN for BUSINESS

REFORMS

Continuous reform process..

Track record growth and bright future…

Robust Economy

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Actual

Forecast

Average Annual GDP Growth 2003-2016 %

Average Annual GDP Growth 2017-2019 %

5.6

3.4

3.7

3.3

Romania

3.5

3.4

Czechia

2.6

2.7

Hungary

1.8

2.4

13th largest economy in the world

Real GDP Growth

2016 GDP ($ Trillion, PPP) China (1)

21,3

US (2)

18,6

India (3)

8,7 5,2

Germany (5)

4,0

Russia (6)

3,8

Turkey

220

200 Poland 180

3,1

Source: TurkStat, OECD, World Bank, IMF, PPP: Purchasing Power Parity

2019

2018

2017

2016

100

2015

2,0

2014

Turkey (13)

2013

2,2

2012

Italy (12)

120

2011

2,3

2010

Mexico (11)

140

2009

2,7

2008

France (10)

2007

2,8

2006

UK (9)

160

2005

3,0

2004

Indonesia (8)

2003

Brazil (7)

240

2002

Japan (4)

(Index: 2002=100)

Robust Economy

Strong macroeconomic fundamentals, reining in public finance and keeping inflation low…

Gross Public Debt Stock as % of GDP

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Budget Balance as % of GDP

90

0

Turkey EU 28

EU 28

80

-3

70 60

-6

50

-9

40

Turkey

-12

30 20

-15

35

Annual Inflation (%)

30 25 20 15

11,9% as of April 2017

10 5

Source: Eurostat, Ministry of Finance, TURSTAT

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

0

Robust Economy

Turkish has generated significant economic activity‌ invest.gov.tr

Turkish economy has more than tripled over the past 14 years & promising more growth in future

Driven by a robust domestic market and entrepreneurial private sector which has spurred investments and exports

Turkish Economy

Contribution to GDP Growth (%)

(GDP at current prices, $Billion)

2002-2016 857

74

31 22

236

2002

-2

2016 Domestic Consumption

Investment Expenditures

Exports

Stocks

-25 Imports

Source: TurkStat

Domestic market + EU

Turkey’s economic growth has paved the way for emergence of a sizeable middle-class… invest.gov.tr

GDP per capita in countries with population over 50 million

Tripling Income per capita (GDP per capita, current prices)

US (1)

57.436

Germany (2)

$10.807

41.902

UK (3)

40.096

Japan (4)

38.917

France (5)

38.128

Italy (6)

Among countries with population over 50 million, only 8 countries have GDP per capita over $10.000

$3.581

2002

2016

2002 1 million 3.3 million 17.8 million

Source: IMF, TurkStat, Euromonitor

Income Groups (Annual disposal income per capita)

30.507

Korea (7)

27.539

Turkey (8)

10.807

Russia (9)

8.929

Brazil (10)

8.727

2016

High (>$55K)

5 million

Upper-middle ($25K – $55K)

21.2 million

Middle ($10K – $25K)

39.9 million

23 million

Low ($5K – $10K)

21.3 million

Poor (<$5K)

10.8 million 3 million

Emergence of a middle-class in Turkey can be observed in various areas with increasing purchasing powerâ&#x20AC;Ś

Domestic market + EU

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Stock of Automobiles (million of passenger cars registered in traffic)

Annual House Sales 11,4

(million of houses) 1,3

4,6 0,4

2002

2016

Mobile Phone

2008

Broadband Internet

(million of subscribers)

(million of subscribers) 75

23

2002 Source: TurkStat, ICTA

2016

62

0,1

2016

2002

2016

Domestic market + EU

The domestic market is further supported by emerging urban centers across Turkeyâ&#x20AC;Ś

There are more than 20 urban centers with populations over 1 million

Source: TurkStat, 2016

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Domestic market + EU

Domestic market + EU market + Free Trade Area invest.gov.tr

Customs Union with the Access to EU allows direct access to the EU Market

= 510 million people

+ = 355 million people in 27 countries with Free Trade Agreements

+ = 80 million people Source: Eurostat, Population as of 2016, Ministry of Economy * In ratification process

Free Access to

945

million consumers

Strategic Location

to manufacture, export and manageâ&#x20AC;Ś invest.gov.tr

Connectivity with key markets through road, rail, sea and air..

Proximity to 1.6 billion people, $24T GDP & $7T trade at 4 hour flight-distance

Follow and cover markets in 16 time zones from New York to Tokyo

Turkish Airlines connects you to 246 destinations in 120 countries

Strategic Location

to manufacture, export and manageâ&#x20AC;Ś invest.gov.tr

Already a manufacturing & export hub for global companies..

Exporting 85% of its production

Exporting 77% of its production

As well as a management hub managing dozens of countries from Turkey..

80 countries 80 countries 67 countries

Production base for MENA

60 countries 52 countries

Using Turkey as Super Hub

Its largest production facility In the world

35 countries

30 countries

Favorable Demographics

half of population under age 30 invest.gov.tr

TURKEY

EUROPE

70-74 60-64 50-54

40-44 30-34 20-24

10-14 0-4 5

3

1

1

Female

3

G r o u p s ( % )

90+

80-84

80-84

A g e

A g e

G r o u p s ( % )

90+

20-24

70-74 60-64 50-54

40-44 30-34 10-14 0-4

5

5

1

1

Female

Male

Working Age Population (15-64)

3

5

Male

Total Dependency Ratio (%)

(Index: 2014=100)

120

3

(Age 0-14 & Age 65+) / Age 15-64

75

Turkey 110

70

Europe

65 60

100

55

Europe 90 2014

2017

2020

Source: Turkstat, Eurostat, UN, 2016

2023

2026

2029

2032

2035

Turkey

50 45 2014

2017

2020

2023

2026

2029

2032

2035

Skilled & Cost-competitive Labor Force

Turkeyâ&#x20AC;&#x2122;s education system upgraded to support a skilled labor pool..

Number of University Graduates (thousands)

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Number of Graduates from Vocational & Technical High Schools (thousands)

801

515

287 287

2002

2015

Labor Force by Education Level University 10%

2002 High School and below 90% Source: Ministry of National Education, Council of Higher Education, Turkstat

2002

2016

Labor Force by Education Level University 23%

2016 High School and below 77%

Skilled & Cost-competitive Skilled & CostLabor Force competitive Labor Force

7,51

Availability of skills and cost-competitive work-force provides productive capacities..

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Availability of Qualified Engineers, 2016

Availability of Competent Senior Managers, 2016

(10=Available; 0=Unavailable)

(10=Available; 0=Unavailable) 6,76

7,21

6,72

6,42

6,40 5,83

5,37

5,50

5,12

5,05

3,12

Slovakia Czechia Hungary

Poland

37,4

19,4

21,3

21,2 19,2

20,6

Hungary

21,1

21,7

20,4 18,2

Source: IMD World Competitiveness Yearbook Executive Opinion Survey based on an index from 0 to 10; Eurostat, OECD, BLS, Turkstat

2015

2014

2013

2012

6,8

2011

8,4

2007

8,7

Turkey

10,9

Poland

Slovakia

UK

Ireland

USA

France

Germany

11,3

Hungary

31,4

Czechia

34,0

Czechia

Turkey vs. USA (US=100)

2015

40,9

Slovakia Romania

Labor Cost per hour in Manufacturing

Labor Cost per hour in Manufacturing ($) 42,2

Turkey

2010

Poland

2009

Romania

2008

Turkey

Turkey has implemented sweeping reforms in many areas and continues to introduce new reforms…

Reforms

M A J O R R E F O R M S

New FDI Law

Ease of company establishment (Law No: 4884)

Coordination Council for the Improvement of the Investment Environment

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Investment Incentives

Tax Reform (Corporate Tax %20 down from 33%)

Establishment and Operating Licences New Labor Law

R&D and Innovation Incentives

Istanbul Arbitration Center

New Capital Market Law

New Insurance Overhaul of Law Social Security Upgrading System Investment ISPAT Incentives

New Banking Law

Upgrading Investment Incentives

Removing Restrictions on Foreigners’ Purchases of Real Estate

New Commercial Code

New Code of Obligations

Upgrading Investment Incentives

Unifying All Exchanges (Stock, Derivative, Gold, etc.) under BIST

Personal Data Protection Law

Industrial Property Law

….

2009 2011

37,0

Source: OECD, World Bank

China

0,067

26,0 21,0

Poland

0,072

Increasing use of English for 0,059 business Turkey

0,083

OECD

0,089

Switzerland

Brazil

Canada

Russia

India

China

0,101

Poland

0,166

USA

0,187

Internationallyminded 12,0 10,5 10,0 9,8 people

9,0

7,0

6,5 Turkey

28,9 0,212

Hungary

1 = Closed to FDI 0 = Open to FDI

Down from 38 days in 2002

Czech R.

Down from 0,283 in 2003

Russia

0,327

2017

Number of Days to set up a Company, 2016

Switzerlan d

FDI Regulatory Restrictiveness Index, 2016

2014 2016

2013

2012

Germany

2008

Romania

2007

Austria

2005 2006

India

2004

2003

2001

Liberal Investment Climate

offers protection and ease of doing business.. invest.gov.tr

20

✓Real Estate purchase

0 Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium,

Luxembourg, Bosnia , Bulgaria, China, Croatia, Cuba, Czech R., Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia,

Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Macedonia, Malaysia, Malta, Moldova,

Netherlands

Mongolia, Morocco, , Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Senegal,

Serbia, Singapore, Slovakia, Slovenia,

Korea, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine,

UAE, UK,US, Uzbekistan, Yemen

Albania, Algeria, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Bosnia, Brazil, Bulgaria,

Canada, China, Croatia, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia,

Germany, Greece, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania,

Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Montenegro,

Singapore, Slovakia, Slovenia, South Africa, Korea, Spain, Sudan, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, TRNC, Turkmenistan, Ukraine, UAE,

UK, US, Uzbekistan, Yemen

Source: Ministry of Economy, Ministry of Finance, Tax Foundation (Tax competitiveness measures countries’ tax policies five categories: corporate income tax, consumption taxes, property taxes, individual taxes, and international tax rules.)

43,2

53,7

56,5

61,4

64,3

40

✓Guarantee of Transfers

67,4

60

69,6

✓International Arbitration

(Index=100 as most competitive) 70

80

70

✓No restriction on foreign ownership

✓Employment of Expats

2016 International Tax Competitiveness

100

74,8

✓National Treatment

Treaties to avoid Double Taxation with 80 countries

75

Bilateral Investment Protection Treaties with 75 countries

84,6

Foreign Direct Investment Law

Lucrative Incentives

Investors are offered lucrative incentives in many ways.. invest.gov.tr

Manufacturing Incentives

✓ Tax deduction & exemption +

Employment incentives

✓ Payroll & Training support +

Special Zones

Free Zones ✓ Tax deduction & exemption +

Organized Industrial Zones ✓ Developed infrastructure

Services Incentives

✓ Tax deduction for exporting services in; Engineering Architecture Design S o f t w a r e Medical Reporting Accounting Call Center Datacenter EDUCATION Healthcare

Technology Development Zones

✓ To support R&D

R&D and Innovation Incentives

✓ Tax deduction & exemption +

✓ Tax deduction & exemption+

Industry

Academia

Benign R&D Ecosystem

R&D incentives are further supported by a favorable ecosystem..

Number of Researchers (thousands) 200

Turkey

Poland

120

15

Romania

Poland

9

3 Slovakia

0

Selected Foreign Companies conducting R&D in Turkey

Source: OECD, Eurostat, Turkstat

Turkey

6

80

0

Increasing R&D Spending ($ Billion)

12

160

40

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Romania Slovakia

Opportunities

Turkey offers abundant opportunities in a variety of sectors.. invest.gov.tr

A U T O M O T I V E

▪ 17th largest auto producer in the world ▪ 2nd largest auto source to the EU ▪ Production: over 1 million vehicles per year ▪ Market: $25 bn (CAGR: 6%) ▪ Export: $20 bn ▪ Well-developed supplier base

M A C H I N E R Y & E L E C T R I C A L E Q P T.

▪ Largest TV & white goods producer in Europe ▪ Market: $40 bn (CAGR: 6.5%) ▪ Export: $21 bn

TV E N E R G Y

▪ Market: $70 bn (CAGR: 8%) ▪ Growing demand ▪ Energy corridor; proximity to 70% of world’s proven primary energy sources ▪ Untapped renewable sources ▪ Government support to renewables

A G R O F O O D

&

B E V E R A G E

▪ Market: $70 bn (CAGR: 8%) ▪ Export: $17 bn ▪ Turkey exports 1,781 types of agricultural products to 190 countries

Source: Turkstat, Ministry of Science, Technology and Industry, CAGR: 2006-2015, markets as of 2015, exports as of 2016

Opportunities

Turkey offers abundant opportunities in a variety of sectors.. invest.gov.tr

A E R O S P A C E

▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

&

$15 bn defense spending Market: $5+ bn (CAGR: 12%) Exports: $1.7 bn (CAGR:13%) A civil aviation hub Civilian fleet size: 540 Civilian passengers: 174 mn Well-developed clusters Strong support for joint ventures with foreign investors

F I N A N C E

▪ ▪ ▪ ▪ ▪

P P P

D E F E N C E

Robust growth with double digits Growing interest in Islamic finance Istanbul Financial Center Unsaturated insurance sector Strong presence of foreign investors

▪ ▪ ▪ ▪ ▪

~$150 bn PPP investment (2003-2016) $325 bn PPP investment expected (2017-2023) Transportation Healthcare Energy

P R I VAT E

E Q U I T Y

▪ Growth companies with track record, but need financing for their full potential ▪ Companies on fast track to international growth with lucrative export opportunities ▪ Diversified industrial & service sectors promising growth ▪ Successful family-owned firms with succession issues ▪ Strong int’l PE presence ▪ Entrepreneurial business culture

Source: Turkstat, SIPRI, Undersecretariat for Defence Industries, DHMİ, SHGM, World Bank, PwC, CAGR: 2006-2016, Market and Exports value as of 2016

FDI

Turkey’s value has been appreciated by foreign investors with increasing FDI in Turkey… invest.gov.tr

FDI Inflows ($ Billion)

180

Number of Foreign Companies in Turkey (‘000)

52,8

5,6

15 1973-2002 (30 years)

2002

2003-2016 (14 years)

Most Attractive Sectors by FDI Stock, as of 2015

Breakdown of Manufacturing by FDI Stock, as of 2015 Rubber & Plastic 4,5%

Others 7,3%

Metals 4,6% Information & Communication Services 10,4%

Manufacturing 33,6%

Wholesale & Retail Trade 15,4% Finance 22,9%

Source: CBRT, Ministry of Economy

2016

Chemicals & Pharma 11,1%

Others 10,2%

Food, Beverages & Tobacco 22,6%

Automotive 19,0%

Computers & ElectronicElectrical 13,0%

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Attached to the Prime Ministry Private sector approach with public sector capabilities Acting as your solution partner; OUR SERVICES ISPAT assists investors before, during and after their entry in Turkey, providing them with professional consulting services including but are not limited to: ✓ General and customized business information ✓ Sectoral analysis and reports ✓ Site selection support to find appropriate location/land for your investment ✓ Arrangements of meetings with governmental bodies and other stakeholders ✓ Matchmaking with local partners and establishing business linkages ✓ Facilitating your investment at all stages ✓ Aftercare Services ✓ Project Launch Services ✓ Facilitating your visit to Turkey

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