Comparative analysis of direct foreign investment policies of Turkey and China

iiiABSTRACTCOMPARATIVE ANALYSIS OF DIRECT FOREIGN INVESTMENTPOLICIES OF TURKEY AND CHINADepartment of EconomicsAnadolu University Social Sciences Institute, February 2006Advisor: Associate Dr. Güler GÜNSOYA direct foreign investment is an investment that is made in a country byacquiring a company in that country or providing an original investment for a newlyfounded company or increasing the capital of an existing company and that bringsknow-how and managerial knowledge along with itself.Various studies of theoretical approaches have been made in order to explaindirect foreign investments. These are theory of product life cycles, `follow theleader? theory and eclectic theory.Foreign investors may have their investments as fixed capital investments,mergers or purchases, joint ventures, build-operate-transfer models and linked(assembly) industry which they may perform through methods of privatization.While foreign investors choose a country in which they will make aninvestment, they consider identifiers such as political, economic, corporate-culturalfactors as well as legal arrangements of such a country.Direct foreign investments may have positive and negative effects on thenational economy. Such effects may be examined in terms of capital accumulation,balance of payments, national revenue, employment, competition power, technologyand foreign affairs.Turkey has implemented legal arrangements needed for the direct foreigninvestments which have become more prominent since the 80s. Furthermore, leadingand determining policies are still being executed in order to attract foreigninvestments into the country. Countries making investments in Turkey are mostly EUcountries. Sectors of investments are production and service sectors.In China that entered into a big transformation process in 1978, direct foreigninvestments were officially allowed in 1979. In order to attract direct foreigninvestments as from this date, necessary legal arrangements and appropriate policieswere developed. Big part of investments made in China is performed by overseasChinese people. Investments are intensively focused on the production and servicesectors. China has succeeded a lot in attracting high quality direct foreigninvestments thanks to its specific policies and has been in the first rank among theworld countries in this respect.