Turkey- An International Business Perspective

8/6/2019 Turkey- An International Business Perspective

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Team Viper ConsultingOctober 22, 2010

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Business practices have both European and Asian/Arabic influences

Turks are known to be very patriotic and can be intensely nationalistic

The Islamic culture of Turkey continues to influence cultural life, beliefs, language,

teaching, social relationships, and democracy

Turkeys culture is generally group-oriented.

Doing business in Turkey is as much about aspects of power, influence, or honor as

much as it is about financial benefits.


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Turkish is the countrys official language

Many businesspeople speak at least some English, French, and/or German

Turks usually speak convincingly, though not overly loud.

People converse in close proximity, standing only two feet or less apart.

Gestures and body language can be extensive and there may be frequent physical

contact with others, including those of the same gender.

Men may greet each other by kissing each others cheeks as a sign of friendship.

Since Muslims consider the left hand unclean, it is not frequently used

It is also rude to cross your arms while facing another person or to blow your nose in public


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Most essential social unit in Turkish culture is the family

A Turks personal life often drive ones opinions and decisions

Family loyalty is a vital aspect of Turkish society and one that has a major impact on

Turkish business practices

Many businesses in Turkey are still family-owned and run and the concept of family connections

Turks tend to focus on positions and titles and will quickly determine the pecking

order of a group

Titles (Doctor or Professor) are highly valued


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Corruption and bribery are quite common in Turkeys public and private sectors.

Fine line between giving gifts and bribes

Most Turkish companies tend to be very hierarchical

Decision makers are usually senior executives, however, collectivism is still very strong

Personal feelings and experiences weigh more strongly than practical evidence and other objective facts

do.

Turkey remains a male-dominated society; however there are substantial differences

across different parts of the country.

In its European part, lifestyles and gender equality similar to western countries

In the Asian part of the country, women struggle to attain positions of similar income and authority as

men, while many of them may not even be allowed by their families to seek employment.


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Foreign direct investment (FDI) key component to the countrys economic

development and growth

Turkey has one of the most liberal legal policies for FDI in the Organization of Economic Cooperation

and Development (OECD)

Areas open to the Turkish private sector are also open to foreign investment.

Turkey provides national treatment, including the acquisition of real estate by

foreign-owned corporate entities registered under Turkish law

Most sectors do not have an investment screening system.

Government uses "reciprocity with the related nation" as a condition of real estate

purchases by foreigners

Upper limit set on real estate purchases by foreign individuals

No individual may own more than 10 percent of the land in any given development zone.


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Equity participation of foreign shareholders is restricted in some sectors

25 percent in broadcasting

49 percent in aviation and maritime transportation

Establishment in financial services, including banking and insurance, and in the

petroleum sector requires special permission from the Government for both domestic

and foreign investors.

Turkey's privatization process continues to move forward.

The Government privatizes State Economic Enterprises through block sales, public offerings, or a

combination of both.Privatization transactions generated $8.1 billion in 2006, $4.3 billion for 2007, and $6.3 billion in 2008.

Recent reforms have simplified company establishment procedures

Reduced permit requirements

Instituted a single company registration form


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Coordination Council for the Improvement of Investment Environment (YOIKK)

formed to provide guidance relating to the investment environment

Investment Advisory Council of Turkey (IAC) closely tied to IMF, WorldBank

Councils provides recommendations that serve as a guideline for the YOIKK

Investment friendly changes to taxation system2006- corporate tax rate was reduced from 30 to 20 percent

No withholding tax for foreign investors bonds, bills, and stocks,

2007- tax Administration established a large taxpayer unit to handle tax collection from large

corporations.

Continued improvement neededEmployment tax is among highest of OECD countriesVAT tax increases on leasing activities from 1 percent to 18 percent

Special consumption tax on alcoholic beverages 275.6%


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Turkey continues to be an attractive destination for foreign business and investment.

$18.3 billion in net foreign direct investment (FDI) in 2008

$10 billion in net FDI in 2010

Turkish companies are attracting private equity investments

The Carlyle Group of the United States is one such investor, having recently bought a 40 percent stake in

Turkeys second largest healthcare company, Medical Park.

One of the fastest recovering economies in the world

6 percent growth rate in the last quarter of 2009

Average growth rate of 6.7% in 2011-2017

GDP levels nearly tripled to $618 billion USD in 2009, up from $231 billion USD in

2002.

Exports reached $102 billion USD at the end of 2009, up from $36 billion USD in 2002.

Inflation has decreased to 6.5 percent at the end of 2009, down from 30% in 2002.


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Successful Economy

Booming economy (USD 230 billion to USD 618 billion GDP from 2002 to 2009)

Sustainable economic growth (4.3 percent annual average real GDP increase for the last 7 years)

Expected to be the fastest growing economy among the OECD members during 2011-2017 with

an annual average real GDP growth rate of 6.7 percent

16th largest economy in the world and 6th largest economy compared to the EU area in 2009

83 billion of FDI in the last 7 years and ranked as the 15th most attractive FDI destination for

2008-2010

Population

A population of 73 million people

Largest youth population compared with the EU

Median age 28

60 percent of the population under the age of 35


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Qualified Labor force

Labor productivity with an annual average growth of 4.4 percent between 2002 and 2009

5th largest labor force compared with the EU

Approximately 450,000 graduates from 150 universities

Around 550,000 high school graduates, including one third from vocational and technical high

schools

Positive Investment Climate

$102 billion USD worth of exports and an increase of 183 percent between 2002 and 2009

Highly competitive investment conditions

Strong industrial and service culture

Equal treatment for all investors

More than 23,000 companies with international capital


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Infrastructure

New and highly developed technological infrastructure in transportation, telecommunications,

and energy

Well-developed and low-cost sea transport facilitiesRailway transport advantage to Central and Eastern Europe

Well-established transportation routes and direct delivery mechanism to most of the EU

countries

Centrally Located A natural bridge between both East-West and North-South creating an efficient and cost

effective outlet to major markets

Easy access to 1.5 billion customers in Europe, Asia, the Middle East and North Africa

Access to multiple markets worth $22 trillion USD of GDP


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Low taxes and Incentives

Corporate Income Tax reduced from 30 percent to 20 percent

Individual Income Tax varies from 15 percent to 35 percent

Tax benefits and incentives in Technology Development Zones, Industrial Zones and Free ZonesNew R&D and Innovation Support Law

Region and sector-based incentive system

Customs Union with the EU since 1996

Customs Union with the EU since 1996, and Free Trade Agreements (FTA) with 16 countriesMore FTAs underway

Accession negotiations with the EU since 2005


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Turkey- An International Business Perspective