Egypt

Executive Summary

The Egyptian government continues to make progress on economic reforms, and while many challenges remain, Egypt’s investment climate is improving.  The country has undertaken a number of structural reforms since the flotation of the Egyptian Pound (EGP) in November 2016, and after a strong track record of successfully completing a three-year, $12 billion International Monetary Fund (IMF)-backed economic reform program, Egypt was one of the fastest growing emerging markets prior to the COVID-19 outbreak.  Increased investor confidence and the reactivation of Egypt’s interbank foreign exchange (FX) market have attracted foreign portfolio investment and grown foreign reserves.  The Government of Egypt (GoE) also understands that attracting foreign direct investment (FDI) is key to addressing many of its economic challenges and has stated its intention to create a more conducive environment for FDI.  FDI inflows grew 11 percent between 2018 and 2019, from $8.1 to $9 billion, according to data from the Central Bank of Egypt.  The United Nations Commission on Trade and Development (UNCTAD) has ranked Egypt as the top FDI destination in Africa between 2015 and 2019.

Egypt has implemented a number of regulatory reforms, including a new investment law in 2017; a new companies law and a bankruptcy law in 2018; and a new customs law in 2020.  These laws aim to improve Egypt’s investment and business climate and help the economy realize its full potential.  The 2017 Investment Law is designed to attract new investment and provides a framework for the government to offer investors more incentives, consolidate investment-related rules, and streamline procedures.  The 2020 Customs Law is likewise meant to streamline aspects of import and export procedures, including a single window system, electronic payments, and expedited clearances for authorized companies.

The government also hopes to attract investment in several “mega projects,” including the construction of a new national administrative capital, and to promote mineral extraction opportunities.  Egypt intends to capitalize on its location bridging the Middle East, Africa, and Europe to become a regional trade and investment gateway and energy hub, and hopes to attract information and communications technology (ICT) sector investments for its digital transformation program.

Egypt is a party to more than 100 bilateral investment treaties, including with the United States.  It is a member of the World Trade Organization (WTO), the African Continental Free Trade Agreement (AfCFTA), and the Greater Arab Free Trade Area (GAFTA).  In many sectors, there is no legal difference between foreign and domestic investors. Special requirements exist for foreign investment in certain sectors, such as upstream oil and gas as well as real estate, where joint ventures are required.

Several challenges persist for investors.  Dispute resolution is slow, with the time to adjudicate a case to completion averaging three to five years.  Other obstacles to investment include excessive bureaucracy, regulatory complexity, a mismatch between job skills and labor market demand, slow and cumbersome customs procedures, and various non-tariff trade barriers.  Inadequate protection of intellectual property rights (IPR) remains a significant hurdle in certain sectors and Egypt remains on the U.S. Trade Representative’s Special 301 Watch List. Nevertheless, Egypt’s reform story is noteworthy, and if the steady pace of implementation for structural reforms continues, and excessive bureaucracy reduces over time, then the investment climate should continue to look more favorable to U.S. investors.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 106 of 198 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 114 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 96 of 131 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 11,000 http://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2019 USD 2,690 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $335,780 2019 $303,175 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $2,244 2019 $11,000 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $1 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2019 41.9% UNCTAD data available at
https://unctad.org/en/Pages/
DIAE/World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
 

* Sources for Host Country Data: Central Bank of Egypt; CAPMAS; GAFI

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, US Dollars, 2019)
Total Equity Securities Total Debt Securities
All Countries 985 100% All Countries 377 100% All Countries 608 100%
United States 242 25% International Organizations 216 57% United States 233 38%
International Organizations 216 22% Saudi Arabia 27 7% Saudi Arabia 92 15%
Saudi Arabia 120 12% Italy 23 6% United Arab Emirates 56 9%
United Arab Emirates 59 6% Switzerland 17 5% United Kingdom 46 8%
United Kingdom 50 5% Singapore 16 4% China 40 7%

Israel

Executive Summary

Israel has an entrepreneurial spirit and a creative, highly educated, skilled, and diverse workforce. It is a leader in innovation in a variety of sectors, and many Israeli start-ups find good partners in U.S. companies. Popularly known as “Start-Up Nation,” Israel invests heavily in education and scientific research. U.S. firms account for nearly two-thirds of the more than 300 research and development (R&D) centers established by multinational companies in Israel. Israel has the third most companies listed on the NASDAQ, after the United States and China. Various Israeli government agencies, led by the Israel Innovation Authority, fund incubators for early stage technology start-ups, and Israel provides extensive support for new ideas and technologies while also seeking to develop traditional industries. Private venture capital funds have flourished in Israel in recent years.

The fundamentals of the Israeli economy are strong, and a 2018 International Monetary Fund (IMF) report said Israel’s economy is thriving, enjoying solid growth and historically low unemployment. With low inflation and fiscal deficits that have usually met targets, most analysts consider Israeli government economic policies as generally sound and supportive of growth. Israel seeks to provide supportive conditions for companies looking to invest in Israel, through laws that encourage capital and industrial R&D investment. Incentives and benefits include grants, reduced tax rates, tax exemptions, and other tax-related benefits.

The U.S.-Israeli bilateral economic and commercial relationship is strong, anchored by two-way trade in goods that reached USD 33.9 billion in 2019, according to the U.S. Census Bureau, and extensive commercial ties, particularly in high-tech and R&D. The total stock of Israeli foreign direct investment (FDI) in the United States was USD 38.5 billion in 2018, according to the U.S. Department of Commerce. This year marks the 35th anniversary of the U.S.-Israel Free Trade Agreement (FTA), the United States’ first-ever FTA. Since the signing of the FTA, the Israeli economy has undergone a dramatic transformation, moving from a protected, low-end manufacturing and agriculture-led economy to one that is diverse, open, and led by a cutting-edge high-tech sector.

The Israeli government generally continues to take slow, deliberate actions to remove some trade barriers and encourage capital investment, including foreign investment. The continued existence of trade barriers and monopolies, however, have contributed significantly to the high cost of living and the lack of competition in key sectors. The Israeli government maintains some protective trade policies, usually in favor of domestic producers.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 35 of 175 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 35 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 10 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $27.1 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 $40,920 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $399.8 billion 2018 $370.6 billion www.worldbank.org/en/country ;
https://www.boi.org.il/en/
DataAndStatistics/Lists/
BoiTablesAndGraphs/eng_b04.xls
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $29,800 2018 $27,100 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) 2018 $12,000 2018 $13,600 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 40% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

* Source for Host Country Data:

Israel’s Central Bureau of Statistics released final 2018 FDI data on March 23, 2020. https://www.cbs.gov.il/en/mediarelease/Pages/2020/Foreign-Direct-Investment-in-Israel-and-Direct-Investment-Abroad-by-Industries-and-Countries-2016-2018.aspx 

https://www.cbs.gov.il/en/mediarelease/Pages/2020/Foreign-Direct-Investment-in-Israel-and-Direct-Investment-Abroad-by-Industries-and-Countries-2016-2018.aspx 

Table 3: Sources and Destination of FDI
Note: Both the Cayman Islands and The Netherlands are widely considered tax havens.
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 145,345 100% Total Outward 103,506 100%
United States 29,921 21% Netherlands 48,509 47%
Netherlands 12,201 8% United States 11,998 12%
Cayman Islands 9,801 7% Switzerland 3,228 3%
China, P.R.: Mainland 4,260 3% Japan 3,028 3%
Canada 3,373 2% Canada 2,602 3%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 158,400 100% All Countries 88,026 100% All Countries 70,734 100%
United States 81,480 51% United States 49,213 56% United States 32,267 46%
United Kingdom 14,089 9% United Kingdom 11,087 13% United Kingdom 3,002 4%
Luxembourg 8,425 5% Luxembourg 7,829 9% France 2,120 3%
France 6,222 4 France 4,102 5% Germany 1,973 3%
Germany 5,448 3% Germany 3,475 4% The Netherlands 1,612 2%

Jordan

Executive Summary

Jordan is a Middle Eastern country centrally located on desert plateaus in southwest Asia and strategically positioned to serve as a regional business platform. Since King Abdullah II’s 1999 ascension to the throne, Jordan has taken steps to encourage foreign investment and to develop an outward-oriented, market-based, and globally competitive economy. Jordan is also uniquely poised as a platform to host investments focused on the reconstruction of Iraq and projects in regional markets.

Jordan’s economy grew by two percent in 2019, despite ongoing domestic and regional challenges. Jordan’s economic growth has been slowed for several years by series of exogenous shocks, starting with the Global Financial Crisis in 2008, followed by the Arab Spring in 2011 which resulted in interruptions of energy imports, the 2015 closure of Jordan’s borders with Iraq (reopened in August 2017) and Syria (partially re-opened in 2018), and an influx of Syrian refugees. By October 2019, foreign direct investment had dropped 29 percent from its level at the end of 2018 and 67 percent from 2017 levels.

During this same period, the government ran large annual budget deficits but has been able to reduce its near-term financing gap with loans, foreign assistance, and savings from economic reform measures enacted as part of an International Monetary Fund (IMF) Extended Fund Facility program that began in August 2016. On March 25, 2020, the IMF Board approved a USD 1.3 billion Extended Fund Facility program for Jordan centered on increasing economic growth, job creation, and transparency while and strengthening fiscal stability and social spending.

The COVID-19 outbreak poses a huge burden on the Jordanian economy. The IMF forecasts a 3.4 percent contraction in Jordan’s Gross Domestic Product (GDP) for 2020 as a result of the pandemic. The government of Jordan implemented a set of measures to contain the spread of the virus, which entailed a strict curfew and lockdown of schools, colleges and 75 percent of all economic activity. The IMF Mission Chief to Jordan commended the government’s measures to defeat the pandemic, stating “Jordan will reap from the tough measures the government put in place in the coming weeks and months.” The IMF approved Jordan to receive additional credit from the Rapid Financing Instrument, to help manage its fiscal obligations during the pandemic.

In parallel, Jordan introduced plans to mitigate the negative impact on the economy in the short and medium terms. The Central Bank of Jordan (CBJ) injected JD 1.5 billion (USD 2.1 billion) to reduce hardships in the banking system. It also lowered the lending rate and allowed borrowers to reschedule their loans until the end of 2020. The CBJ launched a JD 500 million (USD 706 million) loan guarantee program at competitive interest rates to help small and medium enterprises (SMEs) resume their operations and pay their operational costs. The government also announced measures to alleviate financial and operational burdens on businesses by postponing General Sales Tax (GST) payment and customs fees, reducing the cost of labor by exempting companies from paying social security retirement insurance for three months starting in March 2020, reducing energy costs for the industrial sector, and facilitating control procedures on incoming goods by reducing inspection rate of essential products, in addition to halting judicial procedures on defaulting individuals/companies.

In response to the COVID-19 crisis, the Prime Minister formed specialized, public-private sector teams focused on setting manufacturing priorities, balancing domestic needs with export obligations, outlining production plans, and developing an enabling environment to ensure sustainability, focusing on sectors that excelled during the crisis, and have great potential to expand. The sector-focused teams are: pharmaceutical manufacturing team; food manufacturing team; medical devices and sterilization manufacturing team.

International reports and metrics indicate that Jordan’s overall investment environment is improving. Jordan was selected as one of the top three most improved business climates in the World Bank’s “Doing Business Report 2020,” jumping 29 places from 104 to 75. Jordan advanced 33 points in the simplified tax services index for implementing an electronic filing and payment system for labor taxes. In ease of getting credit, Jordan ranked on par with the United States and Australia. In the World Economic Forum’s 2019 Global Competitiveness Report Jordan ranked 40, advancing six points in its domestic competition indicator. Jordan also ranks sixty-third on the 2018 Global Entrepreneurship Index, and twenty-ninth on the Global Innovation Index.

The Jordanian Investment Law grants equal treatment to local and foreign investors and grants incentives for local and foreign investment in industry, agriculture, tourism, hospitals, transportation, energy, and water distribution. In 2017, Jordan passed amendments to the Companies’ Law and a law to regulate and unify monitoring and inspection of economic activities. The government implemented additional reforms in 2018, including the Insolvency Law, Movable Assets and Secured Lending Law and Bylaw, the Venture Capital bylaw, and a new Income Tax Law. In January 2020, The Jordan Investment Commission (JIC) implemented an investors grievances bylaw which enables investors to file complaints concerning decisions issued by government agencies.

In 2020, Jordan endorsed a new Public Private Partnership Law to support the government’s commitment to broadening the utilization of the public-private sectors partnership and encouraging the private sector to play a larger role in overall economic activity.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 60 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 75 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 86 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 179 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 USD 4200 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $42,150 2019 $43,744 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $ 179 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 2019 82.6 % UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

* Source for Host Country Data: Central Bank of Jordan

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries Amount 100% All Countries Amount 100% All Countries Amount 100%
U.S. 3,570 59% West Bank 260 36% U.S. 3415 63%
West Bank 1,009 16% U.S. 155 22% West Bank 749 14%
Luxembourg 375 6% Lebanon 102 14% Luxembourg 345 6%
Ireland 198 3% UK 80 11% Ireland 190 4%
UK 163 2% KSA 54 7 % Netherlands 112 2%

Lebanon

Executive Summary

Lebanon’s economy is in crisis.  GDP contraction could top 20 percent in 2020, the local currency has lost more than 60 percent of its value on secondary exchange markets, and most banks are dollar insolvent.  Since October 2019, Lebanon’s financial sector imposed ad hoc capital controls, preventing most Lebanese from transferring any money overseas or withdrawing dollars from their bank accounts, despite the fact that 75 percent of accounts in Lebanese banks are denominated in dollars.  On March 7, 2020, Lebanon announced it would default on and restructure its nearly USD 31 billion in dollar-denominated debt, the first such default in Lebanon’s history.  On April 30, the government published an economic plan with a focus on restructuring its financial sector and attracting foreign assistance; the next day Lebanon signed an official request for IMF assistance.  Most analysts assess that Lebanon’s near- and medium-term economic future is bleak, with likely fiscal austerity, continuing capital controls, further devaluation, and a potential loss of value applied to wealthy accountholders to recapitalize the banking sector.  The Minister of Finance in May said Lebanon needs USD 28 billion in financial assistance over the next four years.  The World Bank projected that the poverty rate will reach 40-50 percent by the end of this year.

These developments hold consequences for Lebanon’s potential as a destination for foreign investment.  Much depends on how Lebanon implements overdue economic and governance reforms, including in connection with its negotiation and implementation of a potential IMF program.  If the country is able to implement necessary reforms, attract foreign capital, stabilize the exchange rate, and recapitalize its financial sector, opportunities remain for U.S. companies.  To date, Lebanon has the legal underpinnings of a free-market economy, a highly-educated labor force, and limited restrictions on investors.  The most alluring sector is the energy sector, particularly for power production, renewable energies, and oil and gas exploration, though challenges remain with corruption and a lack of transparency.  Information and communication technology, healthcare, safety and security, waste management, and franchising have historically attracted U.S. investments.  However, corruption and a lack of transparency have continued to cause frustration among local and foreign businesses.  Other concerns include over-regulation, arbitrary licensing, outdated legislation, ineffectual courts, high taxes and fees, poor economic infrastructure, and a fragmented and opaque tendering and procurement processes.  Social unrest driven by a decline in public services and growing food insecurity may further hamper the investment climate.

If Lebanon is able to reform its business environment – a likely condition as part of an overarching IMF program – it may one day regain its role as a hub for foreign investment in the Middle East.  Lebanon’s economic crisis is likely to be long and painful, however, and recovery can only be accelerated through quick but careful implementation of reforms.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 137 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 143 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 88 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $407 million  https://apps.bea.gov/international/
factsheet
/
World Bank GNI per capita 2019 $7,600 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $54,961 2019 $53,367  https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD?locations=LB
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $26.3 2019 $407 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) 2018 $0 2019 $16 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 201 129.1% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
 

* Source for Host Country Data: The Lebanese Central Administration of Statistics (CAS).  The BDL is compiling FDI statistics without geographical breakdown. Accordingly, the inward/outward FDI positions from/to US are considered as partial figures and resulting from the Coordinated Direct Investment Survey (CDIS) addressed to banking, financial, and insurance sectors.  CDIS data of 2019 is not yet available

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $2,168 100% Total Outward $3,923 100%
Luxembourg $804 37.1% France $847 21.6%
France $301 13.9% Egypt $510 13.0%
Libya $198 9.1%% Turkey $478 12.2%
United Arab Emirates $165 7.6% Jordan $278 7.1%
Egypt $147 6.8% Luxembourg $214 5.5%
“0” reflects amounts rounded to +/- USD 500,000.

Source: BdL; IMF Coordinated Direct Investment Survey-CDIS, June 2019
N.B. BdL statistical data sources include International Transactions Reporting System (public and private sectors), Ministry of Finance Land Registry Directorate and CDIS.
CDIS data of 2019 is not yet available.

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries $3,079 100% All Countries $1,580 100% All Countries $1,499 100%
United States $1,086 39.1% United States $549 34.7% United States $537 35.8.%
France $318 9.1% Luxembourg $164 10.4% United Kingdom $234 15.6
United Kingdom $299 6.9% France $148 9.4% France $170 11.3%
Luxembourg $178 4.3% Jordan $102 6.5% United Arab Emirates $54 3.6%
Switzerland $137 4.13% Bahrain $99 6.3% Switzerland $40 2.7%

Source: BdL; IMF Coordinated Portfolio Investment Survey-CPIS, June 2019.
N.B. CPIS data of Dec-2019 is not yet available.

Turkey

Executive Summary

Turkey experienced strong economic growth on the back of the many positive economic and banking reforms it implemented between 2002 and 2007.  After the global economic crisis of 2008-2009, Turkey continued to attract substantial investment as a relatively stable emerging market with a promising trajectory of reforms and a strong banking system.  Turkey saw nine years of gross domestic product (GDP) growth between 2011 and 2018. However, over the last several years, economic and democratic reforms have stalled and by some measures, regressed.  GDP growth was 2.6 percent in 2018 as the economy entered a recession in the second half of the year.  Challenged by the continuing currency crisis, particularly in the first half of 2019, the Turkish economy grew by only 0.9 percent in 2019.  While the Government of Turkey originally projected 5.0 percent GDP growth in 2020, the COVID-19 pandemic has dramatically slowed economic activity and the majority of economists project a growth rate that is negative or near zero for the year.  In April 2020, the World Bank lowered its economic growth forecast for Turkey to 0.5 percent for 2020, while the IMF predicts a contraction of 5 percent.

The government’s economic policymaking remains opaque, erratic, and politicized, contributing to a fall in the value of the lira.  Inflation reached more than 11 percent and unemployment over 13 percent by the end of 2019.  The COVID-19 crisis will likely lower inflation due to reduced demand, but will put upward pressure on the unemployment number.

The government’s push to require manufacturing and data localization in many sectors and the recent introduction of a digital services tax have negatively impacted foreign investment into the country.  Other issues of import include tax reform and the decreasing independence of the judiciary and the Central Bank.  Turkey hosts 3.7 million Syrian refugees, which creates an additional economic burden on the country as the government provides them services such as education and healthcare.

Recent laws targeting the Information and Communication Technology (ICT) sector have increased regulations on data, online broadcasting, tax collection, and payment platforms.  In particular, ICT and other companies report GOT pressure to localize data, which it views as a precursor to greater GOT access to user information and source code.  Law #6493 on Payment and Security Systems, Payment Services and e-money Institutions, also requires financial institutions to establish servers in Turkey in order to localize data.  The Turkish Banking Regulation and Supervision Agency (BDDK) is the authority that issues business licenses as long as companies 1) localize their IT systems in Turkey, and 2) keep the original data, not copies, in Turkey.  Regulations on data localization, internet content, and taxation/licensing have resulted in the departure of several U.S. tech companies from the Turkish market, and has chilled investment by other possible entrants to the e-commerce and e-payments sectors.  The laws potentially affect all companies that collect private user data, such as payment information provided online for a consumer purchase.

Turkey transitioned from a parliamentary to a presidential system in July 2018, following a referendum in 2017 and presidential election in June 2018.  The opacity of government decision making, lack of independence of the central bank, and concerns about the government’s commitment to the rule of law, combined with high levels of foreign exchange-denominated debt held by Turkish banks and corporates, have led to historically low levels of foreign direct investment (FDI).

While there are still an estimated 1,700 U.S. businesses active in Turkey, many with long-standing ties to the country, the share of American activity is relatively low given the size of the Turkish economy.  Increased protectionist measures add to the challenges of investing in Turkey, which saw 2018-2019 investment flows from the United States and the world drop by 21 percent and 17 percent, respectively.  Although there are still positive growth prospects and some established companies have increased investments, near-term projections indicate that foreign investment will continue to slow.

The most positive aspects of Turkey’s investment climate are its favorable demographics and prime geographical position, providing access to multiple regional markets.  Turkey is an island of relative stability in a turbulent region, making it a popular hub for regional operations.  Turkey has a relatively educated work force, well-developed infrastructure, and a consumption-based economy.

In the past few years, the government has increasingly marginalized critics, confiscated over 1,100 companies worth more than USD 11 billion, and purged more than 130,000 civil servants, often on tenuous terrorism-related charges alleging association with Fethullah Gulen, whom Turkey’s government alleges was behind the 2016 coup attempt.  The political focus on transitioning to a presidential system, cross-border military operations in Syria, the worsening economic climate, and persistent questions about the relationship between the United States and Turkey as well as Turkey’s relationship with the European Union (EU), all may negatively affect consumer confidence and investment in the future.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 91 of 180 https://www.transparency.org/
cpi2019
World Bank’s Doing Business Report 2019 33 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 49 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 4,656 http://apps.bea.gov/international/
di1usdbal
World Bank GNI per capita 2018 10,420 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or 

international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $753,693 2018 $771,350 www.worldbank.org/en/country 

www.turkstat.gov.tr 

Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $4,433 2018 $4,656 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
www.tcmb.gov.tr 
Host country’s FDI in the United States ($M USD, stock positions) 2018 $1,773 2018 $2,135 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
www.tcmb.gov.tr 
Total inbound stock of FDI as % host GDP 2018 17.7% 2018 17.6% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
  www.tcmb.gov.tr 
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data (2018)
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 103,176 100% Total Outward 44,449 100%
The Netherlands 19,072 18% The Netherlands 17,571 40%
Russian Federation 16,248 16% United Kingdom 4,113 9%
Germany 7,339 7% Jersey 3,419 8%
Qatar 6,448 6% Austria 1,917 4%
Azerbaijan 5,915 5% United States 1,815 4%
“0” reflects amounts rounded to +/- USD 500,000.

IMF’s Coordinated Direct Investment Survey (CDIS) data available at: http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1482331048410

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets (June, 2019)
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,965 100% All Countries 570 100% All Countries 1,394 100%
USA 916 47% USA 274 35%  USA 642 46%
Luxembourg 491 25% UK 91 16%  Luxembourg 429 31%
Cayman Islands 203 15% Luxembourg 62 11%  Cayman Islands 203 15%
UK 93 45% Germany 33 6% Germany 36 3%
Germany 69 24% Russian Federation 17 3%  Malaysia 14 1%

“0” reflects amounts rounded to +/- USD 500,000.
IMF’s Coordinated Portfolio Investment Survey (CPIS) data available at: http://data.imf.org/regular.aspx?key=60587804 

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