Turkey is in urgent need of investment to stem rising unemployment. It is all but obvious now that the construction sector alone cannot sustain economic growth and reduce unemployment. Investment is needed from both foreign and local sources to build plants and create jobs. Yet, economic data for the first nine months of the year shows that foreign direct investment (FDI) in Turkey is on the decline, while Turkey’s own investors are increasingly fleeing abroad.

Optimism was high earlier in the year. FDI stood at $5.1 billion in the first four months, and the deputy head of the International Investors’ Association, Akin Kozanoglu, estimated it would reach $16 billion at year-end. The latest data, however, indicates that level is beyond reach unless something unexpected happens.

What happened in the second half of the year that made investors lose their appetite?

Several factors were at play. While the impact of the conflicts in Iraq, Syria and Ukraine on Turkey grew, expectations rose that emerging economies would have trouble following the US decision to stop monetary expansion. Domestically, unrest in the mainly Kurdish southeast and escalating political tensions have also discouraged foreign and local investors.