Removal from ‘gray list’ expected to boost foreign investments

ISTANBUL

The Financial Action Task Force’s (FATF) decision to remove Türkiye from its “gray list” is likely to give a boost to inflow of foreign investments into the country, according to experts and analysts.

On June 28, FATF announced that it dropped Türkiye from the “gray list” of countries that require special scrutiny.

Türkiye has made "significant progress" in improving its regime of anti-money laundering and combating the financing of terrorism and is "no longer subject to the FATF’s increased monitoring process,” FATF said in a statement.

“This result will further enhance confidence in our financial system and support our efforts to achieve the objectives of our program,” The Finance Ministry said in a statement.

The international watchdog organization dedicated to combating money laundering downgraded Türkiye to the "gray list" in 2021.

“This development is expected to boost Türkiye's reputation internationally, potentially boosting foreign investment and relationships with European and U.S. institutions.” said Mohamed Daoud, Industry Practice Lead at Moody’s.

According to local analysts, FATF’s decision is likely to result in increased inflow of both FDIs and portfolio investments.

“It [the removal from the list] was expected but somehow there were still uncertainties,” said Çağlar Toros a strategist at İnfo Yatırım.

Türkiye is a much more developed county compared with the other nations on the gray list, but some foreign funds refrained from investing in Türkiye because it was on the list, Toros added.

“After FATF’s decision, foreign capital inflows should be expected to increase,” he said.

Cemal Demirtaş at Ata Yatırım agreed that the removal from the gray list is an important development which may give a boost to foreign direct and portfolio investments.

“This issue [the gray list] had been on the market’s agenda since the start of the year. FATF’s decision is a welcome move in terms of foreign fund inflows and its positive impact on the Turkish economy in the long run,” Demirtaş said.

The removal from the gray list will alleviate the additional burden on companies which engage in foreign trade, lessen scrutiny and eventually help increase exports, commented Seyit Ardıç, the president of the Ankara Chamber of Industry (ASO).

In April, Türkiye lured $1.3 billion worth of FDI, with inflows amounting to $2.75 billion in the first four months of the year. Portfolio investments recorded a net inflow of $5.78 billion in January-April.

Last year, FDI inflows amounted to $10.6 billion, down from the previous year’s $13.7 billion. Türkiye saw record FDI inflows in 2007 at $22 billion. Since 2002, total FDI inflows to Türkiye have surpassed $266 billion.