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Volkswagen suspends plan for €1bn car plant in Turkey

By Francis Jay

Military incursion into Syria now threatens to undermine Ankara’s fragile economy

Volkswagen suspends plan for  1bn car plant in Turkey

Turkey’s military operations in Syria now threaten to undermine the country’s fragile economy, after drawing international condemnation.

The Financial Times reports that German car maker Volkswagen (VW) has suspended plans for a new plant in Turkey as a direct result of the Syrian incursion. VW had not officially announced the site of the plant, but had set up a legal entity in the country in a move widely interpreted as preparation for the €1 billion (£859 million, $1.15 billion) investment.

That investment is now under threat, with Bulgaria, Romania and Serbia sensing an opportunity to get back in the running. In a statement, VW said it had suspended any decision on the plant and was “monitoring the current situation with great concern”.

Volkswagen supervisory board member Stephan Weil added: “I personally cannot imagine that, under these conditions, Volkswagen will continue with plans to invest billions in Turkey.”

The proposed Turkish plant had capacity to produce 300,000 cars a year, and was considered vital to VW’s plan to exploit underserved markets in eastern Europe and the Near East, where car ownership is well below western levels.

VW’s unease is mirrored across Europe, suggesting Turkey could pay a heavy economic penalty for its geopolitical ambitions. A member of the German-Turkish Chamber of Commerce said that most German companies were postponing investments in the country.

Meanwhile, France, the UK and Germany have all suspended arms sales to Turkey, while politicians in Washington have raised the possibility of imposing sanctionsto target the country’s energy industry.

And while sanctions imposed by the Trump administration so far have been described as little more than “a slap on the wrist,'' the evaporation of foreign investment could prove far more damaging to an economy yet to recover fully from a debt and currency crisis in 2018.

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