Reuters
US investors may cool on Turkey
Unrest after Istanbul mayor arrest
Central bank propping up lira
Last week’s arrest of the mayor of Istanbul and resulting political unrest in Turkey’s financial capital may cool US companies’ interest in doing business in the country, industry observers say.
Ekrem İmamoğlu, a popular opposition figure who had been gearing up to run in the 2028 presidential election, was detained last Wednesday on charges of corruption. He maintains the charges are politically motivated.
The stock market and Turkish lira have fallen as a result, and Turkey’s appeal as a destination for international investment is in question, trade experts say.
The Istanbul exchange suffered its worst week last week since 2008 financial crisis, the main share index plunging 16 percent, with the market capitalisation of listed companies dropping by $66 billion.
“All the investors want is stability, predictability, and anything that disturbs that, of course, sees a negative reaction,” said Ayşem Sargın, the deputy chair of the American Chamber of Commerce Türkiye (AmCham Türkiye).
The business association counts more than 150 US companies as members, and oversees more than $15 billion of investments in the local economy, according to Sargın. Approximately 2,000 US-based companies are registered in Turkey, she said.
“We hope to go back to that predictable environment again, which we all enjoyed over the past couple of years,” Sargın said last week, speaking from Istanbul during an event hosted in Washington DC by the Atlantic Council.
Trade between Turkey and the US amounted to around $32 billion last year, up from the previous year but still far short of the $100 billion goal that Turkish and American officials set in 2018, during the first administration of President Donald Trump.
“I don’t think you’ll get much disagreement on this panel that these developments are bad for confidence in Turkey and its attractiveness to investors,” said Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center, at the event last week.
If there is a silver lining, according to Lichfield, it is that President Recep Tayyip Erdoğan’s economic team – headed by treasury and finance minister Mehmet Simsek and Central Bank governor Fatih Karahan – are generally well respected both at home and abroad.
“They know what they’re doing… and they did actually respond quite quickly,” Lichfield said.
“Then investors can make up their mind, of course, but Erdogan is using his economics team, which is popular, in a way which suggests that they still have control.”
The Turkish central bank spent nearly $12 billion on March 19 alone to defend the value of the lira and more later, according to Bloomberg News, while the Capital Markets Authority imposed a one-month ban on short-selling, among other measures to stave off a crash.
If it were to drag on, however, the political crisis which has ensued since the arrest could also have a “chilling” effect on renewed interest from the European Union to modernise and expand its customs union with Turkey, Lichfield said.
