An empirical examination of the relationship between foreign direct investment and agriculture Regarding, Türkiye

Abstract

This study examines the influence of Foreign Direct Investment (FDI) inflows on Türkiye’s agricultural sector over the period from 1970 to 2023. Using advanced econometric techniques, including the Augmented Dickey-Fuller (ADF) unit root test, Phillips-Perron (PP) unit root test, Autoregressive Distributed Lag (ARDL) co-integration test, and the Granger Causality test, this research aims to provide a comprehensive understanding of the long- and short-term dynamics between FDI and agricultural growth. The findings indicate that FDI plays a crucial role in enhancing Türkiye’s agricultural sector, particularly in the long run. The results suggest that foreign investment significantly contributes to agricultural growth by improving productivity, modernizing infrastructure, and facilitating technology transfer. However, in the short run, the impact of FDI was found to be statistically insignificant. This suggests that the benefits of FDI take time to materialize, largely due to structural challenges, policy implementation delays, and the time required for investments to translate into tangible sectoral improvements. Moreover, the Granger Causality test highlights a bidirectional relationship between FDI and agricultural expansion. While FDI inflows stimulate agricultural development by providing capital and technological advancements, a growing agricultural sector, in turn, attracts more foreign investors seeking profitable opportunities. This mutual reinforcement underscores the strategic importance of fostering a stable and investor-friendly environment to maximize FDI’s benefits. Given Türkiye’s increasing role in regional and global agricultural markets, sustaining FDI inflows can serve as a powerful tool for both agricultural and overall economic development. Policymakers should focus on enhancing investment security, reducing bureaucratic hurdles, and implementing targeted reforms to ensure that foreign investment effectively contributes to food security, rural employment, and the sector’s long-term resilience.