Turkey's economy almost dead and investors should be wary - analyst

Foreign investors should be wary of Turkey as its economy is on the verge of breakdown due to backsliding in democracy and human rights, and an aggressive foreign policy, David L. Phillips, a former adviser to the U.S. State Department, said on Monday.

"Human rights, democracy, and good neighbourly relations create a favourable climate for doing business. When it comes to Turkey, the canary in the coal mine is nearly dead. Investors should be wary," Phillips wrote for The National Interest, a bimonthly international affairs magazine.

Turkey ruling Justice and Development Party (AKP) has intensified its attacks on the opposition, thousands of people are facing politically motivated charges, and the country's democratic institutions have been weakened. The government has also followed an aggressive foreign policy with its October invasion of Syria, despite the objections of its Western allies, Phillips said.

"Turkey is facing a perfect storm brought on by its ineffective governance, social discontent, and regional conflict. Investors should be wary. The political risk is too high and returns too modest," he said.

The cancellation of plans by Germany's Volkswagen to build a factory in Turkey, citing the military operations in northern Syria, should be a warning about the risks of doing business.

"If current trends continue, then banks and businesses will be running for the exits," he said.