Foreign Direct Investment (FDI) plays a critical role in shaping the economic landscape of any country. For Türkiye, the inflow of FDI has been a focal point of economic policy, as the country positions itself as a regional powerhouse connecting Europe, Asia and the Middle East. According to the Central Bank of the Republic of Türkiye (CBRT), FDI inflows to Türkiye increased by 12.2% year-on-year, reaching USD 13.1 billion in 2025.1 Despite challenges, Türkiye remains a top destination for foreign investment, driven by its strategic location, favourable demographic profile and an improving business climate.
In this blog, I examine the key trends driving FDI in Türkiye and highlight what investors should consider.
Table of contents
Key FDI trends in Türkiye
What investors need to know
The challenges of investing in Türkiye
Conclusion
Sectoral distribution of FDI
According to data from the Turkish Investment Office2, foreign investments in Türkiye are largely directed toward key sectors such as finance (31.6%), manufacturing (24.2%) and energy (10.6%). These sectors have attracted substantial inflows due to Türkiye’s industrial base, infrastructure development and growing energy demand. Additionally, the ICT services sector (8.8%) and wholesale/retail trade (8.4%) also remain attractive, as the country continues to modernise its technological infrastructure and expand its consumer market. Transport and storage sectors (4.7%) are also gaining attention as Türkiye positions itself as a logistics hub bridging Europe and Asia.
The Netherlands, Germany and the United States are the largest contributors to Türkiye’s FDI, with other notable investments from Ireland, Azerbaijan, Switzerland, the UK, the UAE, France and Norway. In terms of stock, the Netherlands is the leader, accounting for 23.6% of total foreign investment, followed by Germany (11.5%) and the US (10.3%). This reflects the importance of strong bilateral ties with European and American investors, as well as the growing influence of Gulf countries in Türkiye’s economic sphere.
FDI growth and future outlookFDI growth in Türkiye has shown promising signs in recent years. According to data from Ernst & Young, 321 FDI projects were recorded in Türkiye in 2022, marking a 22% year-on-year rise and creating nearly 14,000 new jobs. Türkiye’s strategic position and reforms aimed at improving the business environment offer considerable long-term potential for foreign investors.
Geostrategic location
Türkiye’s geographic location is a significant advantage for investors. Situated at the crossroads of Europe, Asia and the Middle East, it serves as a hub for trade and logistics. It’s strategic location allows businesses to capitalise on regional supply chains, as well as preferential trade agreements with many countries.
Dynamic demographics and growing market
Türkiye boasts a young, rapidly growing population with a median age of just 32.5 years. This demographic dividend is reflected in a burgeoning middle class with increasing purchasing power and consumption habits. The country’s population of 85.3 million consumers represents a significant domestic market that attracts foreign brands and companies seeking to tap into the expanding consumer base.
Government support and incentives
The Turkish government has implemented a range of measures to attract foreign investors. The Investment Office of the Presidency facilitates foreign investment by offering various incentives, such as corporate tax reductions, customs duty exemptions, VAT exemptions, land allocations, and interest rate support for investment loans. These incentives are tailored to high-tech, value-added sectors, and regions with less economic development, helping to foster growth across Türkiye.
Access to high potential sectors
Investors can find growth opportunities in sectors such as technology, textiles, telecommunications, shipbuilding, electronics and biotechnology. The Turkish government is actively seeking foreign investments in these areas to promote economic diversification and technological advancement. The country also presents opportunities in infrastructure, healthcare, and education sectors, with growing demand for these services.
Despite improvements in recent years, Türkiye’s bureaucracy can still pose a challenge to foreign investors. Cumbersome administrative procedures, complex regulations and a slow judicial system can delay business operations and create frustration for investors. Moreover, frequent changes in the legal and regulatory framework can create uncertainty, making it more difficult to navigate the investment environment.
Currency and economic instabilityTürkiye’s economy faces ongoing challenges related to currency volatility and inflation. The Turkish lira has experienced significant depreciation in recent years, which adds risk to foreign investments. Macroeconomic instability, combined with rising public debt, adds another layer of uncertainty for investors. These economic factors require careful consideration, particularly for those with longer-term investment horizons.
Geopolitical risksTürkiye’s location at the crossroads of Europe, the Middle East and Asia places it close to several ongoing geopolitical tensions. Conflicts and instability in the Middle East have long been a factor shaping regional economic and security dynamics. The recent escalation of the conflict involving Iran has further increased uncertainty across the region, particularly with regard to energy markets, shipping routes and cross-border trade.
For Türkiye, which borders Iran and maintains extensive trade and energy relations with its neighbours, prolonged instability may create indirect economic pressures. These could include fluctuations in energy prices, disruptions to regional logistics corridors and shifts in trade flows. Heightened geopolitical tensions may also influence investor sentiment, particularly in sectors that depend on stable supply chains and regional connectivity such as energy, transport and international trade.
At the same time, Türkiye’s strategic location and diversified economy allow it to play an important role in regional trade and logistics networks. While geopolitical developments may increase short-term uncertainty, they also highlight the country’s role as a key transit and commercial hub linking Europe, Asia and the Middle East.
Türkiye remains an attractive destination for foreign direct investment due to its strategic location, young population, and government incentives aimed at fostering growth in key sectors. However, challenges such as regulatory complexity, economic instability, and regional geopolitical risks should be carefully evaluated by potential investors. Understanding Türkiye’s evolving investment climate and staying abreast of policy developments will help foreign companies successfully navigate this dynamic market. As Türkiye continues to modernise its infrastructure and diversify its economy, the country’s potential as an investment hub in the region remains promising.
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1. https://www.dailysabah.com/business/economy/turkiye-sees-fdi-rise-over-12-in-2025-despite-subdued-global-climate
2. https://www.invest.gov.tr/en/pages/home-page.aspx