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Türkiye’s efforts to expand the role of renewables in its energy mix offer a “unique opportunity” to attract substantial foreign investment, a senior official from the International Finance Corporation (IFC), the World Bank’s private sector arm, said on Friday.
Susan Lund, vice president for economics and private sector development at IFC, arrived in Türkiye to attend the meeting of the Investment Advisory Council of Türkiye along with other high-level representatives of international institutions and companies.
The participants will discuss Türkiye’s investment climate and strategies to attract more foreign direct investment, particularly in export-oriented sectors, during the meeting which will be chaired by President Recep Tayyip Erdoğan.
The topics of reducing regulatory burdens and modernizing the business environment to facilitate technology transfers and foster innovation as well as discussing ways to support Türkiye’s ambitious renewable energy targets and urban infrastructure projects through private capital mobilization are also on the agenda.
“The green transition offers a unique opportunity for Türkiye to attract substantial investment,” Lund said, adding that enhancing economic governance and tackling trade barriers are essential for further integrating Türkiye into global value chains.
To attract foreign direct financing, she said, Türkiye “needs a conducive macroeconomic environment and a streamlined regulatory framework that facilitates ease of doing business.”
“In recent years, large greenfield investment projects have been announced in the renewable energy sector in emerging markets around the world, totaling $336 billion in 2022 and 2023,” Lund explained.
Countries, such as Egypt, Morocco, Chile and India attracted significant foreign direct investment inflows in recent years, she added.
According to Lund, while Türkiye has “made great progress, further improvements in governance, institutional strengthening and modernization of the business environment are needed.”
She went on to explain that “Türkiye’s current feed-in tariff scheme falls short in terms of international bankability standards with respect to tenor, tariff mechanisms and risk allocation between the parties, limiting investor interest.”
Economic measures
Lund also said Türkiye’s recent economic stabilization measures offer new opportunities to enhance engagement in key sectors such as manufacturing, climate initiatives, small and medium-sized enterprise finance and digital infrastructure.
She was referring to several measures, such as tight monetary policy and fiscal discipline, implemented by the authorities to address high inflation and economic volatility.
Noting that Türkiye is one of the largest emerging markets that IFC operates in, Lund said the country has a relatively young and vibrant workforce, and in many industries has world-class companies.
“It offers significant potential across various sectors, including manufacturing, electric vehicles, technology and healthcare,” she said.
Lund also explained IFC’s presence in Türkiye. As of August 2024, she said, Türkiye represents IFC’s third-largest country exposure globally, with a committed portfolio of $5.2 billion.
This portfolio includes large investments in financial institutions to support earthquake recovery, climate initiatives and infrastructure including the energy sector, Lund explained.
“IFC’s strategy is fully aligned with Türkiye’s Medium-Term Program, focusing on improving access to finance, enhancing competitiveness and job creation in the real sector, reducing the gender gap, tackling climate through mitigation and adaptation, investing in sustainable infrastructure and advancing exports and trade,” she said.
IFC also plans to deepen its involvement in trade finance and export-oriented sectors, she explained.
When asked about IFC’s possible role in securing financing for Türkiye’s large-scale energy projects, Lund said, “We can partner with companies to deliver services across the project lifecycle, from origination to financial structuring to implementation and supervision.”
Lund said foreign direct investment (FDI) to Türkiye fell from $19.3 billion in 2016 to $10.6 billion in 2023.
As a percentage of Türkiye’s GDP, it has stagnated at 1%-1.5%, well below other upper-middle-income peer countries like Mexico, Brazil, Peru and Malaysia, where such levels are 2%-3% of GDP.
According to Lund, revitalizing Türkiye’s FDI “will require building a business environment more conducive to the private sector, which includes continuing to prioritize and sustain macroeconomic stability, while reducing regulatory burdens.”
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