By Mona Shah, Esq. and Rebecca S. Singh, Esq.
Now that Recep Tayyip Erdogan has maintained his stranglehold on Turkey’s presidency following his defeat of Kemal Kilicdaroglu in Turkey’s elections, observers in the EB-5 industry are curious as to whether the longtime autocrat’s victory will spur an exodus of Turkish immigrant investors to the United States under the program. Many practitioners see the potential for an uptick in (if not a deluge of) applications to U.S. Citizenship and Immigration Services (“USCIS”) in the wake of Erdogan’s win, especially in light of his nation’s precarious economic status.
In this volatile political and economic environment, immigrant investors from Turkey may find EB-5 to be particularly attractive; as such, they should at least speak with specialists who can help immigrants navigate the program. Factor in Erdogan’s unorthodox fiscal policies and the stagnation of the Turkish lira, and the prospect of residing in the U.S. while investing in a financially viable project that creates jobs becomes even more appealing.
Faced with such choices, investors from Turkey could be drawn to the program in greater numbers than before—and there is certainly room for growth. According to the U.S. Department of State (“USDOS”) Report of the Visa Office 2022, a total of 49 total EB-5 visas were issued in fiscal year 2022. That bodes well for the program.
Turkish immigrant investors do not experience the delays stemming from visa backlogs that individuals in India and China face.
Turkish immigrant investors do not experience the delays stemming from visa backlogs that individuals in India and China face, as the numbers of applicants from those countries are much greater. With speed at a premium, petitioners can take advantage of a comparatively streamlined process to gain a foothold in the U.S. market, as well as residency there.
Such opportunities could resonate among investors who are seeking stability outside the vicissitudes of Turkish politics. Indeed, public dissatisfaction with the current regime has burgeoned to such a degree that at points it seemed Erdogan’s 20-year grip on Turkey’s top offices was in jeopardy, given significant blows to his campaign that threatened to derail his reign. In short, Erdogan’s triumph has called attention to the holes in his strategy, and this could be a turnoff to investors wary of sloppy messaging.
The biggest elephant in the room, however, is Turkey’s economy, and so far, Erdogan’s economic policies have been catastrophic. Wielding an unconventional strategy that involves reducing, rather than increasing, interest rates to counter mounting inflation, Erdogan has eaten away at the inroads Turkey made after he assumed power as prime minister two decades ago—when he employed less risky monetary tactics. These efforts resulted in a host of new construction projects supporting an economy bolstered by single-digit inflation rates, unemployment rates hovering around 5%, and a per-capita income of $25,000.
The biggest elephant in the room is Turkey’s economy.
At present, however, Erdogan’s government is dealing with balance of payments issues informed by the Turkey’s inability to pay back all of the foreign currency debt that it has accrued over the years, as well as cover its bills for imports. Adding to the misery is the impact of devastating earthquakes that reportedly are expected to bring down economic growth to 2.8% this year from 5.6% in 2022. With the prices of everyday goods rising stratospherically, and homes becoming unaffordable for residents, the crisis in Turkey shows little sign of abating.
In the past, the Erdogan administration has tried to counter such regression via quick-fix methods such as mandating new domestic corporate capital restrictions and leveraging its bilateral relations with countries such as Russia to generate informal cash inflows from overseas. Turkey’s Golden Visa scheme, for instance, is particularly popular with Russian investors. The outlook for these practices, however, merely provides for short-term solutions. Factor in the unknown provenance of much of the inflows trickling into government coffers, and the economic situation becomes even murkier.
On the other hand, any uncertainty surrounding the viability of the program may be assuaged in the wake of Erdogan’s win, as he is expected to retain the effort—cementing the program’s place in the residency and citizenship by investment (“RCBI”) space. This runs counter to the policy espoused by his fiscally mainstream opponent, who, despite the initiative’s popularity, was expected to terminate the initiative had he won. Driven by Turkey’s financial doldrums, Erdogan likely will continue to court foreign investment in this manner.
Enter the prospect of transformative fiscal change. Erdogan’s reported shift to more widely accepted economic policies may make the investment landscape particularly appetizing. Making things even more promising for the Turkish economy is the news that the President met with Mehmet Simsek—a widely respected economist who has served under Erdogan as Deputy Prime Minister and Minister of Finance, and had previously conveyed his decision to eschew the political arena—and suggested that Simsek may rejoin the government.
Still, there are challenges. Any political repercussions stemming from Erdogan’s ire over U.S. Ambassador Jeff Flake’s visit with Kilicdaroglu could reverberate if relations sour between the United States and Turkey. Additionally, Erdogan’s alleged nepotism has cast doubt on the competence of some of his staff, which does not bode well for endeavors to build a resurgent economy. When one considers the ruthless precedents (including suppression of the media) Erdogan has set in his quest to retain power in Turkey’s highest office, the future is brimming with political uncertainty.
Does this mean individuals should entirely avoid investing in Turkey? Not necessarily, but investors at this juncture should exert extra caution when considering opportunities in the country. It is possible that Erdogan’s election win will spark a burst of foreign inflows, yet the slumping economy and unpredictable political environment demonstrate that the aforementioned problems will not be corrected overnight.
Expectations are that Turkish immigrant investors will be carefully scrutinizing their options in the EB-5 area.
Under Erdogan’s auspices, Turkey’s Golden Visa program has a future, but it remains to be seen how impactful that will be. For now, the endeavor’s mirror-image program in America, EB-5, looks like a more promising way to take advantage of RCBI opportunities in the global arena, and expectations are that Turkish immigrant investors will be carefully scrutinizing their options in this area.
Such revelations may be welcome news for the EB-5 set, even though it may be a while before the economic environment is clear again. But this group, which is accustomed to waiting, is a patient lot.
At the start of a new-era-that-feels-like-an-old-one in Turkish politics, that is both a virtue and a necessity.
Simon Butler contributed to this article.
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