Türkiye’s defence industry has entered a new investment phase, moving beyond export success into a more complex contest for foreign capital, technology partnerships and regulatory trust. A new legal and market analysis published by Paksoy on Mondaq on July 29, 2026 frames the sector as one of Türkiye’s clearest industrial growth stories, but also one where foreign investors must understand that open ownership rules do not remove national security scrutiny.
From Procurement Market to Defence Export Platform
The basic investment story is no longer that Türkiye is a large defence buyer. It is that Türkiye is becoming a production and export platform for drones, naval systems, armoured vehicles, missiles, electronics and aerospace components.
According to Anadolu Agency, Haluk Görgün, head of Türkiye’s Defence Industries Secretariat, said Turkish defence and aviation exports reached $10.05 billion in 2025, up 48 percent year on year. Goods exports accounted for $9.87 billion and services for $184 million. New defence contracts rose from $10 billion in 2024 to $17.8 billion in 2025, a 78 percent increase.
The geography of those sales matters for investors. Görgün told Anadolu that roughly $5.6 billion, or 56 percent, of 2025 defence exports went to the EU, NATO countries and the United States. That signals a shift from Türkiye as a lower-cost supplier to emerging markets toward a supplier increasingly tested by NATO standards, certification requirements and alliance procurement politics.
Paksoy’s July 2026 analysis, published by Mondaq, cites a defence ecosystem of more than 3,500 companies, around 100,000 employees, more than 1,400 projects and approximately $20 billion in annual turnover. The Turkish Investment Office’s defence and aerospace sector profile says Türkiye’s defence spending was nearly $25 billion in 2024, placing it 17th globally, while sector exports rose from $1.6 billion in 2013 to $7.2 billion in 2024.
For foreign direct investment, these figures change the nature of market entry. A foreign company is not simply assessing a sales office in Ankara or Istanbul. It may be evaluating a manufacturing joint venture, a component supply chain, an R&D centre, a technology licensing structure or a platform partnership tied to future exports.
NATO, F-35 Talks and the Geopolitical Premium
The timing of the Mondaq analysis is significant. Türkiye hosted the NATO Summit in Ankara on July 7 and 8, 2026, placing its defence industry in front of allied governments and prime contractors. NATO’s official summit page said the Defence Industry Forum focused on the alliance’s 5 percent defence investment plan, increased production, cooperation and joint procurement. NATO also announced initiatives including more than $40 billion over five years for counter-drone capabilities and EUR 70 billion in military support for Ukraine in 2026.
That creates a demand-side tailwind for Turkish suppliers, especially in unmanned systems, air defence, munitions and cost-effective manufacturing. But it also increases political sensitivity. Türkiye remains a NATO member with the alliance’s second-largest army, yet its defence relationships have been shaped by disputes over the Russian S-400 system, U.S. sanctions and removal from the F-35 programme.
Reuters reported on July 7, 2026 that U.S. President Donald Trump said he would lift sanctions on Türkiye and decide on a potential F-35 sale, while noting that legal and congressional hurdles remained. Reuters also recalled that Washington imposed CAATSA sanctions in 2020 over Türkiye’s acquisition of the S-400 system and removed Ankara from the F-35 programme.
For investors, the lesson is direct. Defence FDI in Türkiye has geopolitical upside, but the same upside can affect financing, export licensing, end-user approvals and sanctions risk. A U.S., European or Gulf investor entering a Turkish defence supply chain must assess not only Turkish law, but also home-country export controls, NATO security sensitivities and possible third-country restrictions.
Recent procurement decisions show how quickly the landscape is moving. The Associated Press reported in October 2025 that Türkiye and the United Kingdom signed an £8 billion, approximately $10.7 billion, agreement for 20 Eurofighter Typhoon jets. Paksoy also points to contracts worth around $6.5 billion for the Steel Dome integrated air defence network and ASELSAN’s planned $1.5 billion investment in a major defence technology base.
The Legal Framework Is Open, But Not Light Touch
Türkiye’s general FDI regime is relatively open. Paksoy notes that Türkiye does not have a standalone foreign investment authority that clears all inbound transactions, and that foreign entities may generally establish, acquire and dispose of business interests without ownership caps, except in specific regulated sectors such as aviation.
Defence is different in practice. Paksoy says there are no explicit foreign ownership restrictions in the defence sector, but foreign investment can trigger reassessment of licences and permits. If a target company holds a production permit for military products, a change in shareholding may lead to regulatory review and could affect operational approvals.
This is where incorporation and corporate structuring become strategic, not administrative. Investors must decide whether to establish a wholly owned Turkish subsidiary, acquire a minority stake, form a joint venture with a Turkish partner, license technology, or build an R&D and manufacturing vehicle around a specific project. Each model carries different implications for shareholding notifications, board composition, authorised signatories, facility security, personnel clearances and eligibility for defence programmes.
The key authorities are the Presidency of Defence Industries, known as SSB, and the Ministry of National Defence. SSB coordinates defence policy, procurement projects and sector support mechanisms. The Ministry of National Defence remains central for licensing and operational approvals. Companies involved in classified projects must also handle facility and personnel security clearances.
For foreign investors, this makes legal and tax compliance a front-end workstream. Regulatory diligence should begin before term sheets are finalised. Government relations also matter because project timing, licence comfort and procurement eligibility often depend on early, documented engagement with the competent authorities.
Europe’s Drone Market Shows the New Partnership Model
The most important signal for international investors may be the Baykar and Leonardo partnership. Brookings wrote in June 2026 that the joint industrial vehicle, LBA Systems, is designed to adapt Turkish unmanned platforms to European requirements, certification standards and market conditions. Brookings argued that this is not merely an Italian purchase of a Turkish system, but the integration of a Turkish platform into a European defence-industrial structure.
Paksoy says the Italian government conditionally approved the Baykar and Leonardo joint venture in June 2026 under Italy’s foreign investment review regime, while Baykar separately completed its acquisition of Piaggio Aerospace in 2025. That sequence illustrates the new FDI pattern. Turkish companies are investing outward into Europe, while European primes are using Turkish platforms, engineering speed and cost structures to address capability gaps.
For a foreign investor considering Türkiye, this matters in two ways. First, Türkiye can be a base for exports into Europe, the Gulf, Africa and Asia, but certification, end-user rules and partner-country reviews must be built into the business model. Second, Turkish defence companies are not only acquisition targets or local distributors. In drones, electronic warfare, naval systems and munitions, they may be co-developers with their own intellectual property and export relationships.
The export-control environment is also part of the investment case. Paksoy says Türkiye’s Ministry of National Defence generally processes export licence applications within comparatively short timeframes and that Türkiye’s regime is often less procedurally restrictive than some other jurisdictions. That can be an advantage for technology developed in Türkiye. But investors still need disciplined import-export planning, especially where U.S., EU, UK or dual-use components are involved.
Investment Incentives and Execution Risk
Türkiye’s state support ecosystem is another reason the sector is attracting attention. Paksoy identifies investment incentives, tax and customs advantages, social security support, financing support, R&D centre incentives, technology development zone benefits and individually negotiated packages for strategic projects. The national FDI strategy for 2024 to 2028, published by the Turkish Investment Office, targets raising Türkiye’s share of global FDI flows to 1.5 percent by 2028.
Yet incentives in defence are rarely plug-and-play. A factory producing dual-use electronics, a maintenance facility for aerospace components, or a software centre working on command-and-control systems may each fall into different incentive, licensing and security categories. Investors need to map land, customs, employment, tax, export and procurement issues together rather than sequentially.
Expo representation is also commercially relevant. IDEF, SAHA Expo and sector-specific NATO or regional events are not only marketing venues. They are where procurement agencies, prime contractors, subsystem suppliers and government stakeholders test credibility. For new entrants, representation at these platforms can support partner identification, distributor selection and early regulatory signalling.
The execution challenge is on the ground. Defence projects require secure facilities, vetted personnel, controlled imports, documented subcontractors and project management discipline. A foreign investor that wins a local partnership but underestimates site selection, permitting, hiring, customs handling or reporting obligations can lose time before production begins.
What This Means for Foreign Investors
Türkiye’s defence sector offers one of the more compelling industrial FDI stories in emerging markets, but it is not a simple liberalisation story. The opportunity lies in combining Turkish manufacturing scale, export momentum and state-backed programmes with foreign capital, certification experience, specialised components and international market access.
The practical advisory steps are concrete. Investors need market entry analysis to choose the right segment and partner model. They need incorporation and corporate structuring that anticipates licence review, control questions and future exits. They need investment incentives work to identify tax, customs, R&D and strategic project support. They need legal and tax compliance from the start, particularly around production permits, security clearances, reporting duties and export controls.
Government relations are central because SSB, the Ministry of National Defence and other public bodies shape the operating environment. Expo representation can help foreign companies establish credibility and meet Turkish partners before committing capital. Import-export facilitation is necessary where components, software, dual-use goods or third-country technologies are involved. Project management then determines whether approvals, facilities, staffing and delivery obligations come together on schedule.
The direction of travel is clear. Türkiye is no longer only buying defence capability. It is selling it, co-producing it and using it as an industrial policy instrument. Foreign investors that treat the sector as both a commercial opportunity and a regulated national security environment will be best placed to participate.