Foreing companies leaving Turkey in droves
Number of foreign companies decided to leave Turkey is increasing due to the volatility of exchange rates and political tensions
Foreign Direct Investment (FDI) inflows to Turkey have decreased rapidly and dozens of foreign companies have shut down their operations.
Can Teoman’s article which published on January in Ahval pointed that many firms in different sectors decided to leave Turkey mostly due to volatility of exchange rates and political tensions with other countries.
As the table shows that the FDI inflows – the kind of foreign investment that creates employment – have rapidly declined.
According to Can Teoman’s analysis “In 2017, FDI plummeted to $4.8 billion, its lowest level since 2004. Among other factors, Turkey’s international policies and deteriorating relationship with the Western world are no doubt playing a significant role. Particularly in the last year, as Turkey’s relations with the United States and Germany entered a new low, FDI followed.”
“FDI fell in 2017, not only from Western countries, but Russian, Qatari and other Arab countries’ investment in Turkey tumbled as well. Of course, these investors look at the same criteria that their Western counterparts do. Hence 14 of Turkey’s 20 most significant investors reduced their investments in Turkey in 2017.”
“Many international companies are leaving Turkey. In the last few weeks, the credit rating agency Fitch, Canadian technology company SOTA, and Italian restaurant chain Carluccio’s have decided to withdraw from the Turkish market. There are media reports that department store chains including H & M, Zara and Mango are planning to downgrade their Turkish operations.
Why are these companies leaving Turkey? Each has a different story. Some cannot achieve their growth goals, some are worried about the volatility of exchange rates, and some blame unfair competition.
Susan Docherty, CEO of Canyon Ranch, spoke candidly about her reasons for closing her hotel in Turkey last year said:
“I need to be honest with you, my heart cries for the Turkish people. I spent a lot of time in my first two years in this role travelling to Turkey, and it just breaks your heart to see what’s going on in the country right now. The location is beautiful, on the edge of the Aegean Sea overlooking the Greek isles, but with everything happening there, the tourism and travel industry in Turkey has received a significant blow.”
The tourism sector is not the only sector losing foreign investors, some of the companies that have left Turkey in recent years include (excluding the recent Crate and Barrel exit):
A recent addition to the companies that decided to leave Turkey is Ewe AG which is a German natural gas provider.
Ewe AG, one of the largest energy companies in Germany, has announced that it will sell its shares in Bursagaz and Kayserigaz, two local natural gas companies.
The company has reached an agreement with Barclay’s to serve as the consultant in meeting with potential investors to sell its Turkish assets, Bloomberg has reported, based five different sources.
Bloomberg notes that the German company initiated a series of meetings at the start of March and has so far met with Aygaz Inc., Kolin Group, and Aksa Doğazgaz Inc.
EWE AG, maintains an 80 percent share in natural gas distributors Bursagaz and Kayserigaz. EWE AG is also a partner with Çalık Energy Inc., which holds 10 percent of Bursagaz and Kayserigaz shares. Remaining shares in the two companies are held by municipalities.
While EWE AG, Aksa Doğalgaz, Aygaz, Barclays ve Kolin refrained from commenting on the EWE’s decision to pull out of Turkey, according to a Reuters report dated Feb. 22, EWE has hired Goldman Sachs as a consultant to sell 26 percent of shares of its main company in Germany.
The German energy company joins other foreign brands that have shut down their operations in Turkey. In 2015, Canadian lingerie company La Senza announced it would be pulling out of Turkey, followed by British clothing brand Top Shop in 2016; Dutch clothing brand C&A in June of 2016 and German cosmetics chain Douglas in August of 2016.
U.S. furniture retailers Crate and Barrel announced last week that it will be withdrawing from the Turkish market.
Crate and Barrel’s departure made it the latest international brand to leave Turkey, as concerns over political developments undermine confidence in the economy.