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Turkey-European Union relations which was envisaged in the Ankara Agreement as a preparatory stage, has passed the transition and is now at the last stage. The preparation phase has passed through the preparatory work for compliance with the conditions in the EU between 1963-1970 and more., The Additional Protocol which was signed on November 23, 1970 and entered into force on 1 January 1973 constituted the transition period. This Additional Protocol established the creation of a customs union covering industrial products, made provision for mutual free movement of workers, the implementation of a preferential trade regime by expanding agricultural products as well as the approximation of laws between the European Community and designated areas in Turkey to help with the launch of the free movement process (Oner, 2009). The relationship between the European Union and Turkey with the European Community, which was signed on the 12th September, 1963 and in the framework entered into force on the 1st December, 1964 at the Ankara Agreement formed the basis. The partnership between Turkey and the European Union with Turkey, which is the ultimate goal, is to be realised through three stages of development envisaged towards full membership. These are the preparatory period, the transition period and the final period.

European Union Criteria and Direct Foreign Investment Entry The first decision on the free movement of capital in the European Union came from directives issued by the Council in 1988. Integration based on the free movement of goods and services, people and capital GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 220 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 started as a movement and as in this direction today, especially the continued development of the single market program implementation in the years 1985-1992. In fact, the free movement of capital within the Union is regulated by Articles 67 and 73 of the Treaty of Rome. According to the aforementioned article of the Rome Treaty, "Member States shall, during the transitional period of the Common Market to the extent required for the proper functioning as a member with restrictions on capital movements of the person staying in the state, the parties to the restrictions on capital movements belong to the people, the nationality of the parties, a distinction relating to residence or investment site supervisor actions must be gradually removed ". Also communities, the movement of capital, influence member countries importance, they have a weighted value of the remaining countries, it was decided that the remaining countries of direct investment increase will only be retained from profits. Even though Turkey is not part of the EU, apart from the abundance of factors of production and wealth is located next to the Customs Union and can be part of the EU. Also as a result of the enactment of the International Arbitration at the end of 1999 there has been a great increase in our country towards capital outflows from the EU.

The Development of Foreign Capital Movements in the European Union

The definition of foreign direct investment can be made as follows: buying a company in one country, providing initial capital for a newly established company, existing companies and to companies in other countries by increasing its capital and technology with its own business knowledge and is an investment that brings with it control authority of the investor (Karluk, 2001).

Determinants of Direct Foreign Capital

There are a wide range of preferences as to how barriers to trade and foreign investment as well capital flows between countries can be removed, decreasing transport and communication costs and decisions taken by companies in terms of what to produce, how production must be done and who to sell produced goods. Thus, while international boundaries in the industry and company size are rapidly proliferating, on the other hand there is stiff competition in these markets. All the major firms increased international production by increasing investments abroad and investments, which did not only contribute to the expansion of the national market, but also in a larger scale regional and global markets.

Direct foreign capital flows serve as an integral element of globalization are among the factors that shape the global economy. Total gross domestic product of international mergers and acquisitions of direct and indirect foreign capital flows has driven the world economy in recent years with some important indicators, such as exports of goods and services recording much faster growth (karabulut, 2007).

Foreign Direct Investment in the European Union

The first decision on the free movement of capital within the EU was enacted in 1988. The free movement of goods and services, capital and people in the EU began as a movement towards integration and thus far, and in particular the single market has continued its development program since its implementation between the years 1985-1992. In fact, the free movement of capital within the Union is regulated by Articles 67 and 73 of the Treaty of Rome. According to this; "Member States shall, during the transitional period of the Common Market to the extent required for the proper functioning member with restrictions on capital movements of the person sitting in the state, the parties to the restrictions on capital movements belong to the people, the nationality of the parties, domicile or remove gradually discrimination supervisor transactions related to investment site" is defined. In addition, the community, the movement of capital, they have a weight of member countries importance, they have a weighted value of the remaining countries, it was decided that the remaining countries of direct investment increase will only be retained from profits (Ceken, 2002).

GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 221 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 The Nature and Developments of Foreign Investment in Turkey The history of foreign direct investment in Turkey dates back to the Ottoman Empire period. Private equity firms from foreign countries preferential trade agreements in line with the scope of capitalisation at that time showed more activity in the field of public services and the exploitation of natural resources (Bayraktar, 2003). Many countries are competing with each other to attract foreign capital. Turkey too is willing to bring foreign capital to the country, trying to make it attractive. Studies on this subject are described below and as such what factors are to be paid attention with regards to foreign investments are given in the following articles in the World Investment Report in 2002.

Just like the EU, the possibility of access to key markets such as NAFTA, Competitive wages and a skilled workforce, High-quality infrastructure and logistics capability to, The heavy industrial zone, A favourable position in terms of international production systems of the Company, Paying attention to factors such as effective bureaucracy.

The number of countries that can fulfil all of these factors are not too much. To which Turkey due to the lack of high-quality infrastructure and logistics facilities is striving to make improvements in these areas so as to become an attractive country for foreign investors (Gokhan, 2010). Turkey is among the world's largest twenty emerging market. In terms of transport, energy, adequate technological infrastructure facilities and human resources has favourable conditions. There is also availability of both skilled and unskilled labour and dynamic entrepreneurial sector very. Labour cost and production factors are also relatively cheaper compared to other countries (Aydemir, 2012).

The Impacts of Foreign Direct Capital on the Turkish Economy

Foreign direct capital has various effects on the economy. These can be described below:

Impacts on Balance of Payment Balance of payments is a table showing the payments made to foreign institutions in a systematic manner by the residents living in a country, company or keeps a register of transactions carried out with foreign countries with the income obtained from foreign countries within a particular period. In other words, a country's most important item is an indicator of economic relations with foreign countries that maintain trade and capital movements (Akar, 2010). Just like any other developing country Turkey is in the balance of payments deficit because domestic savings are not sufficient. The best option in order to close this gap is through direct foreign investment. In order to allow for import substitution for direct foreign capital investments, there is the need to reduce the burden of paying foreign exchange on import section of the balance of payments of the country, increase exports towards the external market which will in effect affect a country’s balance of payment. Much discussed topic in Turkey in recent years and is the current account balance deficit. Increasing direct foreign investment by reducing imports and increasing exports in foreign trade if achieved would have a positive impact on closing the deficit in the current account balance of payments. Payments of foreign investment Kindleberger noted that the effect on balance payment equilibrium occur in two ways. The first is the increase in the country's foreign exchange reserves with foreign investment. The second is the gain derived from payments by replacing imports and exports GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 222 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 contribute to the stability it provides. Investors coming to the country to invest, in setting up the factory or during installation or operation phase of the operation will require many inputs. A large part of such input will be provided by the host country for foreign capital inflows, thus foreign exchange earnings will have an impact (Cinko, 2009).

Direct investments that have an impact on the balance of payments of the country, may also sometimes have negative contribution. From the moment the foreign company starts production, the raw materials or intermediate goods necessary for production is available from their own country and other countries. This results in an increase imports. Also apart from the production factors it can adversely affect the balance of payments. The presence of the a lot of foreign investors in a country could adversely affect a country’s balance of payments in case they stop production or removes capital payments from the host country.

Impacts On Production: Foreign direct investment is extremely effective on employment and growth, as well as countries that have been supporting the development of technology and related industry due to the creation of knowledge transfer. Due to the fact that foreign direct investments are driven by a profit motive it negatively affects competition in the market, transfers and technological development leading to extremely low levels. In addition, it can also be said that domestic capital investment organisations take decisions to cause an increase in the activities of these organisations and to grow export (Cinko, 2009).

Impacts on Growth: There exists a mutual interaction between capital movements and macroeconomic structures and as such affects each other from different angles. For example, the underlying factors for high growth rate of the GDP and the continuous increase in private consumption are the increases in foreign financing and imported goods. National credit and the increase in the funds available for loan in the financial system have led to an increase in financial development and capital inflows which stimulate aggregate demand. Turkey’s economic growth is closely related to the amount of capital inflow that is there is a positive relation between the economic growth and capital inflows.

Although Turkey posses a relatively young population as well as high economic growth potential, the scarcity of capital factors adversely affects the participation of the labour force in taking part in the production process. Moreover the deficiency in domestic savings and capital formation emerges as the biggest obstacle. In recent years, with poor economic growth linked to the downward trend in investment of domestic savings an increase in foreign savings investments would positively affect economic growth.

Increases in capital inflows also lead to an increase in economic growth rate. However, in 1991 and 1994, when there was capital outflows there was a negative effect on economic growth. Contraction in production in 1998 led to a decline in the economic growth. In 2001-2009, with a 5 percent growth rate the worst economic growth rate in the last 50 years was experienced as result (Akbulut 2009).

Foreign direct investment has tended to increase since the eighties. Many countries are in various support enforcement efforts as well as tax incentives. The economic rational of foreign direct investment, is to allow for technology transfer to the country so as to increase the economic growth. by providing. By conducting case studies that examines macro perspective as well as the micro-economic level issues reveal a more pessimistic picture. Direct positive impact on the growth of foreign investments is evident with the contribution they make to micro-branding and export. Lack of sufficient savings and technological backwardness in developing countries are some of the reasons that there has been limited economic development (Cinko, 2009). A developing country faced with the problem of lack of resources can achieve economic growth by increasing by domestic investment, and savings as part of the positive expectations from foreign capital investments. However, countries with bad macroeconomic indicators, high debt ratios, and more short-term capital inflows cannot realize these positive expectations. In particular, short-term foreign funds which are formed due to the high volatility of speculation in the longer term could have negative repercussions country and can emerge rapidly as a factor leading to economic crisis. In this case, therefore, economic growth and development is adversely affected (Kar and Tatlısoz, 2008).

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