THE INTERFACE OF GEOECONOMIC COMPETITION: INVESTMENT DIPLOMACY

In a global order where investment diplomacy comes to the fore, Türkiye stands out with its strong potential and strategic location for long-term and sustainable investments

During his first overseas visit to the Middle East, US President Trump did not neglect to secure a $2 trillion investment pledge from the leaders of oil-rich Gulf countries. Although this move could be seen as an effort by the US to recoup its military spending in these countries, it also highlighted the importance of attracting investment. Similarly, former German Chancellor Scholz and French President Macron, during their visits to China, were accompanied by leading representatives of the business world, aiming to develop both trade and investment, thereby choosing to give the business world an important role in their diplomatic contacts.

One of the priority issues that is always on the agenda in international diplomatic contacts is the dimension of investment. While new concepts such as commercial diplomacy, digital diplomacy, climate diplomacy, ocean diplomacy, and space diplomacy are gaining increasing importance today, investment diplomacy is also becoming one of the main areas of focus. All countries view investments as a lifeline to develop their economic potential, achieve lasting economic benefits, production, employment, and added value, improve relations with other countries, and build international prestige. Although a portion of international capital seeks short-term, high returns, what is truly meaningful is attracting long-term, greenfield investments that focus on creating tangible value. Such investments are also an indicator of confidence in a country’s future. For developing countries such as Türkiye, which do not have sufficient capital accumulation in their domestic markets, the search for all kinds of foreign direct investment is certainly valid; however, what is really important is investments that target the country’s developing sectors, create employment, and generate R&D. However, attracting these investments is not that easy. For example, for investments in clean technology sectors, a country’s employment.

capacity and technological and logistical infrastructure must also be sufficient. The world has now transformed into a large market, and countries are using investment diplomacy to highlight their advantages and positive features in order to attract foreign investment. On the other hand, while countries strive to attract foreign investment, their own investors may choose to invest in regions they perceive as more competitive or cost-effective.

INVESTMENT DIPLOMACY AS THE GLOBAL INVESTMENT MAP RESHAPES ITSELF

As the world goes through a period of heightened geopolitical tensions, we see that behind these tensions lies an increasingly fierce competition and a deepening geo-economic earthquake. China’s rise and the US’s growing external deficit are leading to an increasingly complex battle over economic distribution. The Western world is struggling to maintain its competitiveness. China is expanding its sphere of influence while trying to ensure that its trade routes are not affected by global crises. Global foreign direct investment, which peaked at $2 trillion in 2015, fell to $962 billion in 2020, rose again to $1.5 trillion in 2021, but fell by %12 to $1.3 trillion in 2022. According to the latest data, although foreign direct investment is expected to reach $1.5 trillion again in 2024, a significant portion of this figure will be made up of highly unstable financial flows.

Another important feature is that direct capital flows are not occurring in a manner that supports sustainable development goals and inclusive growth targets, but rather in pursuit of shortterm returns and risk management. In addition to geopolitical tensions, the increase in financial risk and uncertainty is undermining long-term investor confidence and eroding the development potential of capital flows. This situation is particularly evident in sectors sensitive to changes in national security, supply chain structures, and trade policies. For developing countries, the failure of capital flows to be directed toward employment-generating areas such as infrastructure, energy, and technology, where they are most needed, is causing them to lag behind in global competition and preventing them from achieving inclusive growth. Aligning public and private sector investments with development goals, ensuring that international credit institutions provide guarantees for investments, and making policy-making processes predictable are critical for directing foreign investments toward more productive areas.

TÜRKİYE AS A DIRECT INVESTMENT DESTINATION

When we look at Türkiye’s position within this highly variable and multidimensional matrix, we see that Türkiye has significant advantages in certain areas. These advantages are also decisive in terms of Türkiye’s success in investment diplomacy. Türkiye’s rapid growth in the long term, its ability to easily adapt to new technologies, its relatively young population, and its frequently emphasized geographical advantages make it an attractive country for foreign investment. Türkiye’s candidacy for European Union membership and its Customs Union relationship based on the Association Agreement also offer opportunities in terms of access to the European market. Although some opportunities, such as tax advantages offered to foreign investments, are effective, there are important steps that can be taken to further develop Türkiye’s potential to attract foreign investment. As a rapidly urbanizing country, Türkiye needs to resolve its infrastructure problems, prevent urban sprawl, educate its human resources according to contemporary criteria, particularly in the fields of STEM (science, technology, engineering, and mathematics), eliminate the uncertainty created by the inflationary economic environment, and effectively combat critical issues such as earthquakes and climate change. At the same time, strengthening Türkiye’s access to the European market through its Customs Union relationship with the EU, updating the Customs Union, and increasing investments from Europe in particular should be important goals. Türkiye’s alignment with the European Green Deal and digital agenda can also create significant momentum in terms of attracting investments in green investments and clean technologies.

In addition, Türkiye’s revival of its suspended EU accession process and reform agenda, its compliance with contemporary legal and administrative standards ranging from the rule of law to the protection of fundamental rights and freedoms, including the protection of personal data and decarbonization, will significantly support its emergence as a leader in the investment diplomacy race.