EU Integration Process: Will Turkey Overcome the FDI Obstacles?

This paper analyses Turkey's performance in attracting foreign direct investment (FDI) and highlights the key obstacles for FDI in Turkey. When compared with its main competitor countries, which includes the group of new EU member states and other candidate countries, it can be concluded that Turkey has a very low rate of FDI inflow. It can be argued that one of the major problems behind the low performance in FDI inflows is macroeconomic instability. In this paper we will also perform an empirical analysis to examine the relationship between FDIs and macroeconomic instability in the EU new member states and the candidate countries. According to the regression results, it was found that the GDP and openness have positive effects on the FDI, whereas current account balance and inflation have been found to be negative. On the other hand, the results related to external debt run opposite to our expectations.