Turkish Foreign Direct Investment Act

The concept of foreign direct investment was introduced in Turkey in 2003. This legal concept, new to Turkish Law is preferred to encour- age foreign investments. Economic crises in Turkey in recent years have demonstrated that the performance of short term portfolio investments have not been satisfactory. Short term portfolio investments are not favoured as they lead to hot money mobility in the market. Instead, it has been asserted that long term investments re- duce the resource deficit in developing countries to a great extent, hence making them the favoured option.1 Foreign direct investment manifests traits that are in complete opposition to short term indirect investments. Accordingly, foreign direct investment is the type of investment where foreigners retain the control and management powers in the company; that intends to stay in the host country for the long term and therefore maintains a physical presence therein and is prepared for possible risks in that host country.2 In order for foreign direct investment to have access to all these facilities, it needs certain structural arrangements it desires in the host country. These arrangements relate to the conditions – or the invest- ment climate, as doctrine usually refers to it – of the host country. Foreign investor would want the economic, political and legal climate of the host country to be suitable.3 Therefore we may argue that legal regulations alone would not suffice to create an adequate environment for investments.