[cOUNTRY PROFILE: TURKEY]

2016Thai Trade Center, Istanbul

Mihriban AKYOL

Contents

1. GENERAL INFORMATION 2-161.1. Location 21.2. Weather 21.3. Capital Cities 31.4. Administrive Divisions 41.5. Governance 51.6. Demography 81.7. Language 111.8. Currency 121.9. Time Zone 131.10. Holidays 131.11. Transportation 14

2. ECONOMIC OUTLOOK 19-732.1. Economic Situation 192.2. Statistics 222.3. Monetary Policy 232.4. International Trade 252.5. Trade with Thailand 282.6. Import Regulations 31

2.6.1. Import Regime 342.6.2. Export Regime 37

2.7. Logistics System 372.7.1 Customs Procedures 51

2.8. Challenges/Oppurtunities 673. MAIN INDUSTRY REPORTS 69-944. TARGET PRODUCTS FOR THAI EXPORTERS 94

4.1. Rubber 944.2. Food 944.3. Jewelry 944.4. Air-conditioning Products 94

5. FOREIGN INVESTMENT 95-1415.1. Investment 955.2. Incentives 1025.3. Cost and Finance of a Business 1165.4. Establishing a Business 1195.5. Labour Regulations and Social Security 1235.6. Taxes 1285.7. Transferring Assets 1325.8. Regulatory Authorities 134

6. INTELLECTUAL PROPERTY 141-144

1

1. GENERAL INFORMATION

1.1. Location

Largely located in Western Asia, with the smaller portion of Eastern Thrace in Southeast Europe.

Turkey is bordered by eight countries: Syria and Iraq to the south; Iran, Armenia, and

the Azerbaijani exclave of Nakhchivan to the east; Georgia to the northeast;Bulgaria to the

northwest; and Greece to the west. The Black Sea is to the north, the Mediterranean Sea to the

south, and the Aegean Sea to the west. The Bosphorus, the Sea of Marmara, and

the Dardanelles(which together form the Turkish Straits) demarcate the boundary

between Thrace and Anatolia; they also separate Europe and Asia.[5] Turkey's location at the

crossroads of Europe and Asia makes it a country of significant geostrategic importance.[6]

1.2. Weather

The coastal areas of Turkey bordering the Aegean and Mediterranean Seas have

a temperate Mediterranean climate, with hot, dry summers and mild to cool, wet winters.[173] The

coastal areas bordering the Black Sea have a temperate oceanic climate with warm, wet

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summers and cool to cold, wet winters.[173] The Turkish Black Sea coast receives the greatest

amount of precipitation and is the only region of Turkey that receives high precipitation

throughout the year.[173] The eastern part of that coast averages 2,200 millimetres (87 in)

annually which is the highest precipitation in the country.[173] The coastal areas bordering

the Sea of Marmara, which connects the Aegean Sea and the Black Sea, have a transitional

climate between a temperate Mediterranean climate and a temperate oceanic climate with warm

to hot, moderately dry summers and cool to cold, wet winters.[173] Snow falls on the coastal areas

of the Sea of Marmara and the Black Sea almost every winter, but usually melts in no more than

a few days.[173] However snow is rare in the coastal areas of the Aegean Sea and very rare in the

coastal areas of the Mediterranean Sea.[173]Mountains close to the coast prevent Mediterranean

influences from extending inland, giving the central Anatolian plateau of the interior of Turkey

a continental climate with sharply contrasting seasons.[173]Winters on the eastern part of the

plateau are especially severe.[173] Temperatures of −30 to −40 °C (−22 to −40 °F) can occur in

eastern Anatolia.[173] Snow may remain at least 120 days of the year.[173] In the west, winter

temperatures average below 1 °C (34 °F).[173] Summers are hot and dry, with temperatures often

above 30 °C (86 °F) in the day.[173] Annual precipitation averages about 400 millimetres (15 in),

with actual amounts determined by elevation. The driest regions are the Konya plain and the

Malatya plain, where annual rainfall is often less than 300 millimetres (12 in). May is generally

the wettest month, whereas July and August are the driest.[173]

1.3. Capital Cities

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1.4. Administrive Divisions

Turkey has a unitary structure in terms of administration and this aspect is one of the most

important factors shaping the Turkish public administration. When three powers (executive,

legislative and judiciary) are taken into account as the main functions of the state, local

administrations have little power. Turkey is a unitary not a federal system, and the provinces are

subordinated to the centre. Local administrations were established to provide services in place

and the government is represented by the governors and city governors. Besides the governors

and the city governors, other senior public officials are also appointed by the central

government rather than appointed by mayors or elected by constituents.[95]Turkey is subdivided

into 81 provinces for administrative purposes. Each province is divided into districts, for a total

of 923 districts.[96]Turkey is also subdivided into 7 regions and 21 subregions for geographic,

demographic and economic purposes; this does not refer to an administrative division.[97]

1.5. Governance

Turkey is a parliamentary representative democracy. Since its foundation as a republic in 1923,

Turkey has developed a strong tradition of secularism.[98] Turkey's constitution governs the legal

framework of the country. It sets out the main principles of government and establishes Turkey

as a unitary centralized state. The President of the Republic is the head of state and has a largely

ceremonial role. The president is elected for a five-year term by direct elections and Recep

Tayyip Erdoğan is the first president elected by direct voting. Executive power is exercised by

the Prime Minister and the Council of Ministers which make up the government, while

the legislative power is vested in the unicameral parliament, the Grand National Assembly of

Turkey. The judiciary is independent of the executive and the legislature, and the Constitutional

Court is charged with ruling on the conformity of laws and decrees with the constitution.

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The Council of State is the tribunal of last resort for administrative cases, and the High Court of

Appeals for all others.[99] The prime minister is elected by the parliament through a vote of

confidence in the government and is most often the head of the party having the most seats in

parliament. The prime minister is Ahmet Davutoğlu who is also the leader of the Justice and

Development Party (AKP) since 27 August 2014. After the June 2015 general election, Davutoğlu

announced his resignation due to the Justice and Development Party losing its majority, he will

stay as acting Prime Minister until a new government is formed. Universal suffrage for both

sexes has been applied throughout Turkey since 1933, and every Turkish citizen who has turned

18 years of age has the right to vote. There are 550 members of parliament who are elected for a

four-year term by a party-list proportional representation system from 85 electoral districts.

The Constitutional Court can strip the public financing of political parties that it deems anti-

secular or separatist, or ban their existence altogether.[100][101] The electoral threshold is 10

percent of the votes.[102] Supporters of Atatürk's reforms are called Kemalists, as distinguished

from Islamists, representing two extremes on a continuum of beliefs about the proper role of

religion in public life.[103] The Kemalist position generally combines a kind of democracy with

a laicist constitution and westernised secular lifestyle, while supporting state intervention in

the economy, education, and other public services.[103] Since the 1980s, a rise in income

inequality and class distinction has given rise to Islamic populism, a movement that in theory

supports obligation to authority, communal solidarity and social justice, though what that entails

in practice is often contested.[103]

Constitution

 

The Republic of Turkey adopted its first Constitution in 1924. It retained the basic principles of

the 1921 Constitution, notably the principle of national sovereignty. As in the 1921 Constitution,

the Turkish Grand National Assembly was deemed the "sole representative of the nation." The

second Constitution of the Republic of Turkey was adopted in 1961 and introduced a bicameral

Parliament: the National Assembly with 450 deputies and the Senate of the Republic with 150

members elected by general ballot and 15 members elected by the President. These two

assemblies constitute the Turkish Grand National Assembly. The third Constitution of the

Republic of Turkey was passed in 1982 by a national referendum and is still in effect today.

Under the 1982 Constitution, sovereignty is vested fully and unconditionally in the nation. The

Constitution emphasizes that the Turkish state, with its territory and nation, is an indivisible

entity, and a secular, democratic, social state under the rule of law. All individuals are equal

without any discrimination before the law, irrespective of language, race, skin color, gender,

political orientation, philosophical creed, religion and sect, or any such considerations. The 1982

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Constitution recognizes all basic human rights and freedoms such as freedom of speech, freedom

of the press, freedom of residence and movement, freedom of religion and conscience, freedom

of thought and opinion, freedom of expression and dissemination of thought, freedom of

association, freedom of communication, the right to privacy, right to property, right to hold

meetings and demonstration marches, right to legal remedies, guarantee of lawful judgment and

right to acquire information. Parliament has passed many constitutional amendments to make

the 1982 Constitution more democratic and to expand democratic rights and freedoms in the

country. These efforts gained significant momentum after the EU recognized Turkey as a

candidate country in 1999 and later agreed to start full membership talks with Turkey in 2005.

 

Legislature

 

Legislative power is vested in the Turkish Grand National Assembly (TGNA) on behalf of the

Turkish nation and this power cannot be delegated. TGNA is composed of 550 deputies, while

Parliamentary elections are held every four years. Deputies represent the entire nation and

before assuming office, take an oath. The functions and powers of TGNA comprise the adoption

of draft laws, and the amendment and repeal of existing laws; the supervision of the Council of

Ministers (Cabinet) and the Ministers; authorization of the Council of Ministers to issue

governmental decrees having the force of law on certain matters; debating and approval of the

budget draft and the draft law of final accounts, making decisions on the printing of currency,

the declaration of war, martial law or emergency rule; ratifying international agreements;

making decisions with 3/5 of the TGNA on proclamation of amnesties and pardons in line with

the Constitution.

 

Judiciary

 

Judicial power in Turkey is exercised by independent courts and high judicial organs on behalf of

the Turkish nation. The judicial section of the Constitution is based on the principle of the rule of

law. The judiciary is founded on the principles of the independence of the courts and the security

of tenure of judges. Judges work independently; they rule on the basis of personal conviction in

accordance with constitutional provisions, law and jurisprudence. The legislative and executive

organs must comply with the rulings of the courts and cannot change or delay the application of

these rulings. Functionally, a tripartite judicial system was adopted by the Constitution and

accordingly, it was divided into an administrative judiciary, a legal judiciary and a special

judiciary.

 

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The Constitutional Court, the Supreme Court of Appeals, the Council of State, the Supreme

Military Court of Appeals, the Supreme Military Administrative Court and the Court of

Jurisdictional Conflicts are the supreme courts stipulated in the judicial section of the

Constitution. The Supreme Council of Judges and Public Prosecutors and the Supreme Council of

Public Accounts are two additional organizations having special functions which are set out in

the judicial section of the Constitution.

 

Executive

 

The executive branch in Turkey has a dual structure. It is composed of the President of the

Republic and the Council of Ministers (Cabinet).

 

President

 

The President of the Republic is the head of State and represents the Republic of Turkey and the

unity of the Turkish nation. The President is elected by popular vote among the Turkish Grand

National Assembly members who are over 40 years of age and have completed higher education

or among ordinary Turkish citizens who fulfill these requirements and are eligible to be

deputies. The President's term of office is five years and one can be elected for two terms at

most. The President of the Republic has duties and power related to the legislative, executive

and judicial branches, and is responsible for ensuring the implementation of the Constitution,

and the regular and harmonious functioning of the organs of state.

 

Prime Minister and Council of Ministers 

 

The Council of Ministers (Cabinet) consists of the Prime Minister, designated by the President of

the Republic from members of the TGNA, and various ministers nominated by the Prime

Minister and appointed by the President of the Republic. Ministers can be assigned either from

among the deputies or from among those who are not members of the TGNA qualified to be

elected as a deputy. Ministers can be dismissed from their duties by the President upon the

proposal of the Prime Minister when deemed necessary. The fundamental duty of the Council of

Ministers is to formulate and implement the internal and foreign policies of the state. The

Council of Ministers is accountable to the Parliament in the execution of this duty.

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1.6. Demography

According to the Address-Based Population Recording System of Turkey, the country's population

was 74.7 million people in 2011,[239] nearly three-quarters of whom lived in towns and cities.

According to the 2011 estimate, the population is increasing by 1.35 percent each year. Turkey

has an average population density of 97 people per km². People within the 15–64 age

group constitute 67.4 percent of the total population; the 0–14 age group corresponds to 25.3

percent; while senior citizens aged 65 years or older make up 7.3 percent. [240] In 1927, when the

first official census was recorded in the Republic of Turkey, the population was 13.6 million.[241] The largest city in Turkey, Istanbul, is also the largest city in Europe in population, and the

third-largest city in Europe in terms of size. Article 66 of the Turkish Constitution defines a

"Turk" as "anyone who is bound to the Turkish state through the bond of citizenship"; therefore,

the legal use of the term "Turkish" as a citizen of Turkey is different from the ethnicdefinition.

However, the majority of the Turkish population are of Turkish ethnicity. They are estimated at

70–75 percent.[18] Reliable data on the ethnic mix of the population is not available, because

Turkish census figures do not include statistics on ethnicity. [245] The three "Non-Muslim"

minority groups claimed to be officially recognized in the Treaty of

Lausanne are Armenians, Greeks and Jews. Officially unrecognized (mostly Muslim) ethnic

groupsincludeAlbanians, Arabs, Assyrians, Azeris, Bosniaks, Circassians, Georgians, Lazs, Persian

s, Pomaks (Bulgarians), Yazidis and Roma.[246][247] The Kurds, a distinct ethnic group, are the

largest non-Turkic ethnicity, around 18-25 percent of the population. [18][248] Kurds are

concentrated in the east and southeast of the country, in what is also known as Turkish

Kurdistan. Kurds make up a majority in the province of Dersim

Bingöl, Muş, Ağrı, Iğdır, Elâzığ, Diyarbakır,Batman, Şırnak, Bitlis, Van, Mardin, Siirt and Hakkari, a

near majority in Şanlıurfa province (47%), and a large minority in Kars province (20%).[249] In

addition, due to internal migration, Kurdish communities exist in all major cities in central and

western Turkey, particularly in Istanbul, where there are an estimated 3 million Kurds, making

Istanbul the city with the largest Kurdish population in the world.[250] Minorities besides the

Kurds are thought to make up an estimated 7–12 percent of the population.[18] Minorities other

than the three officially recognized ones do not have any minority rights. The term "minority"

itself remains a sensitive issue in Turkey, while the Turkish government is frequently criticized

for its treatment of minorities.[251] Although minorities are not recognised, state-run Turkish

Radio and Television Corporation (TRT) broadcasts television and radio programs in minority

languages.[252][253] Also, some minority language classes can be chosen in elementary schools. [254]

An estimated 2.5 percent of the population are international migrants.[255] Turkey hosts the

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largest number of refugees in the world, including 2.2 million Syrian refugees, as of September

2015.[256][257][258] The country's official language is Turkish, which is spoken by 85.54 percent of

the population as mother tongue.[20] 11.97 percent of the population speaks the Kurmanji dialect

of Kurdish as mother tongue.[20] Arabic andZaza are the mother tongues of 2.39 percent of the

population, and several other languages are the mother tongues of smaller parts of the

population.[20] Endangered languages in Turkey include Abaza, Abkhaz, Adyge,Cappadocian

Greek, Gagauz, Hértevin, Homshetsma, Kabard-Cherkes, Ladino (Judesmo), Laz, Mlahso, Pontic

Greek, Romani, Suret, Turoyo, Ubykh, and Western Armenian.[259]

Religion

Turkey is a secular state with no official state religion; the Turkish Constitution provides

for freedom of religion and conscience.[262][263] The role of religion has been a controversial

debate over the years since the formation of Islamist parties.[264] For many decades, the wearing

of the hijab was banned in schools and government buildings because it was viewed as a symbol

of political Islam. However, the ban was lifted from universities in 2011, from government

buildings in 2013,[265] and from schools in 2014.[266]

Islam is the dominant religion of Turkey with 99.8 percent of the population being registered

as Muslim[18][267] (although some sources give a slightly lower estimate of 96.4 percent) [247] with

the most popular sect being the Hanafite school of Sunni Islam. The highest Islamic religious

authority is the Presidency of Religious Affairs (Turkish: Diyanet İşleri Başkanlığı); it interprets

the Hanafi school of law, and is responsible for regulating the operation of the country's 80,000

registered mosques and employing local and provincial imams.[268] Academics suggest

the Alevi population may be from 15 to 20 million while the Alevi-Bektaşi Federation claims that

there are around 25 million[269][270] and according to Aksiyon magazine, the number

of Shiite Twelvers (excluding Alevis) is 3 million (4.2 percent).[271] There are also

some Sufi Muslims.[272] Roughly 2 percent are non-denominational Muslims.[273]

The percentage of non-Muslims in Turkey fell from 19 percent in 1914 to 2.5 percent in 1927,[275] due to events which had a significant impact on the country's demographic structure, such as

the Armenian Genocide, thepopulation exchange between Greece and Turkey,[276] and

the emigration of non-Muslims (such as Levantines, Greeks, Armenians, Jews, etc.) to foreign

countries (mostly in Europe and the Americas) that actually began in the late 19th century and

gained pace in the first quarter of the 20th century, especially during World War I and after

the Turkish War of Independence.[277] Today there are more than 120,000 people of

different Christian denominations, representing less than 0.2 percent of Turkey's population,[278] including an estimated 80,000 Oriental Orthodox,[279] 35,000 Roman Catholics,[280] 18,000 Antiochian Greeks,[281] 5,000 Greek Orthodox[279] and smaller numbers of Protestants.

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[282] Currently there are 236 churches open for worship in Turkey. [283] The Eastern Orthodox

Church has been headquartered in Istanbul since the 4th century.[284][285]

There are about 26,000 people who are Jewish, the vast majority of whom are Sephardi.[286] There have been Jewish communities in Asia Minor since at least the 5th century BC and

many Spanish and Portuguese Jewsexpelled from Spain were welcomed into the Ottoman

Empire in the late 15th century, twenty centuries later. Despite emigration during the 20th

century, modern-day Turkey continues to have a small Jewish population.

Education

The Ministry of National Education is responsible for pre-tertiary education.[289] This is

compulsory and lasts twelve years: four years each of primary school, middle school and high

school.[290] Less than half of 25- to 34-year-old Turks have completed at least high school,

compared with an OECD average of over 80 percent.[291] Basic education in Turkey is considered

to lag behind other OECD countries, with significant differences between high and low

performers.[292] Turkey is ranked 32nd out of 34 in the OECD's PISA study.[290] Access to high-

quality school heavily depends on the performance in the secondary school entrance exams, to

the point that some students begin taking private tutoring classes when they are 10 years old.[292] The overall adult literacy rate in 2011 was 94.1 percent; 97.9 percent for males and 90.3

percent for females.[293]

The extensive and disciplined education system of Turkey underwent serious reforms in the last

decade, like the compulsory eight-year education, improvement of the overall quality of the

Turkish education system, as well as the increase in the number of schools and related

establishments. Many private and foundation schools, in addition to public schools, offer

education services; moreover international schools, where only foreign nationals can attend, are

present throughout the country. While schools providing education in European languages such

as English, German, French and Italian are available, there are other institutions where

languages such as Russian, Japanese and Chinese are taught, as well.

 

Starting in 2012, Turkey is undertaking a revolutionary education initiative, the Fatih Project,

which will equip all public school students with tablet PCs and classrooms with electronic

10

boards, increasing the overall quality of primary education in the country, while setting an

example for the world in the integration of the latest technologies into education.

By 2011, there were 166 universities in Turkey.[294] Entry to higher education depends on

the Student Selection Examination (ÖSS). In 2008, the quota of admitted students was 600,000,

compared to 1,700,000 who took the ÖSS exam in 2007.[295] Except for the Open Education

Faculty (Turkish: Açıköğretim Fakültesi) at Anadolu University, entrance is regulated by the

national ÖSS examination, after which high school graduates are assigned to universities

according to their performance.[296] According to the 2012–2013 Times Higher Education World

University Rankings, the top university in Turkey is Middle East Technical University (in the

201–225 rank range), followed by Bilkent University and Koç University (both in the 226–250

range), Istanbul Technical University and Boğaziçi University (in the 276-300 bracket).[297]

Healthcare

Health care in Turkey used to be dominated by a centralized state system run by the  Ministry of

Health. In 2003, the government introduced a sweeping health reform programme aimed at

increasing the ratio of private to state health provision and making healthcare available to a

larger share of the population. Turkish Statistical Institute announced that 76.3 billion TL was

spent for healthcare in 2012; 79.6 percent of which was covered by the Social Security

Institution and 15.4 percent of which was paid directly by the patients. [298] In 2012, there were

29,960 medical institutions in Turkey,[299] and on average one doctor per 583 people[300] and 2.65

beds per 1000 people.[299] Life expectancy (as of 2010) was 71.1 years for men and 75.3 for

women, with an overall average of 73.2.[301]

1.7. Language

Turkish also referred to as Istanbul Turkish,[16] is the most widely spoken of the Turkic

languages, with around 10–15 million native speakers in Southeastern Europe (mostly

in European Turkey) and 60-65 million native speakers in Western Asia (mostly in Asian

Turkey). Outside of Turkey, smaller groups of speakers exist in Germany, Bulgaria,

Macedonia, Northern Cyprus (although a partially recognized state), Greece, the Caucasus, and

other parts of Europe and Central Asia.To the west, the influence of Ottoman Turkish—the

variety of the Turkish language that was used as the administrative and literary language of

the Ottoman Empire—spread as the Ottoman Empire expanded. In 1928, as one of Atatürk's

Reforms in the early years of the Republic of Turkey, the Ottoman script was replaced with

a Latin alphabet.

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The distinctive characteristics of Turkish are vowel

harmony and extensive agglutination. The basic word

order of Turkish is subject–object–verb. Turkish has

no noun classes or grammatical gender. Turkish has a

strongT–V distinction and usage of honorifics. Turkish

uses second-person pronouns that distinguish varying

levels of politeness, social distance, age, courtesy or

familiarity toward the addressee. The plural second-

person pronoun and verb forms are used referring to a

single person out of respect.

1.8. Currency

On January 1, 2009, the Central Bank of the Republic of Turkey introduced a new series

of Turkish Lira banknotes which differ from, and replaced, the 2005 series called New Turkish

Liras  (Yeni Türk Lirası) .There was no change in the value of the Turkish lira. All values and

conversions remained the same. (Here arecurrent Turkish lira exchange rates.) The new "E9"

series of banknotes are called simplyTurkish Lira (Türk Lirası) instead of New Turkish

Lira(Yeni Türk Lirası) as on the older 2005-series notes. Here's how the 2009-series Turkish

Lira notes look:

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The Turkish lira (Turkish: Türk lirası) (sign: ₺; code: TRY; usually

abbreviated as TL)[2] is the currency of Turkey and the Turkish Republic

of Northern Cyprus. The Turkish lira is subdivided into 100 kuruş.

1.9. Time Zone

Lat/Long: 41°01'N / 28°58'E

1.10. Holidays

Official Holidays (2016)

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1.11. Transportation

The transportation system in Turkey makes good use of the country’s highly developed

infrastructure. For urban transportation, the major cities of the country are equipped with

extensive rail networks both under and above ground, while public and private buses carry

hundreds of thousands daily. In addition to public transport, taxi services are extremely

common, offering a low-cost and expedited means of local travel. For coastal towns like Izmir

and Istanbul, ferry services offer many travelers a viable choice, being both fast and far reaching.

For long distance travel, highways are the choice for many, as hundreds of travel agencies run

daily bus shuttles to even the farthest towns and cities from major metropolitan centers. Rail is

another means of low-cost and widely used transport; the rail network crosses Turkey from east

to west. The railways are given special consideration, the network is enlarging and fast-trains

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enter service yearly. The air travel option is becoming cheaper every year, thanks to the

development of the Turkish aviation industry and the increasing number of domestic

carriers. With a total of around 50 airports in all major population centers, one can fly from one

city to another in Turkey in less than an hour, regardless of the distance.

Railway

The TCDD - Türkiye Devlet Demir Yolları (Turkish State Railways) possess 10,984 km

of 1,435 mm (4 ft 8 1⁄2 in) gauge, of which 2,336 km are electrified (2005).[1] (Map)

There are daily regular passenger trains all through the network.[2] TCDD has started an

investment program of building 10.000 km high-speed lines until 2023. By February 2014, three

high speed train routes are running. Ankara-Eskişehir, Ankara-Konya and Eskişehir-Konya. The

freight transportation is mainly organized as block trains for domestic routes, since TCDD

discourages under 200 to loads by surcharges.

In 2004, Marmaray project started on a rail tunnel under the Bosphorus straits.

Between Istanbul and Ankara, a high speed railroad line is being constructed now next to the

normal speed railroad which is being renovated. When finished, travel time between the two

major cities will reduce from 6,5 hours to 3 hours and 10 minutes, using trains ordered from

Spain that can reach up to 250 km/h. Construction of a high speed railroad line

between Ankara and Konya was begun in order to connect the two cities with a direct line and

reduced travel time from several hours to approximately one hour. The high speed railroad line

between Ankara and Konya was finished in 3 June 2011 and was put into service in 23 August

2011. Several other high speed and normal railroad projects are currently in the planning stage.[3] Because of works connected with the Marmaray and Istanbul-Ankara high speed line there are

currently no rail services linking Istanbul with the rest of Anatolia. The suburban services

from Haydarpaşa terminate at Pendik where the train tracks end. Cities

with underground railway systems are Ankara, Istanbul, İzmir, Bursa, and Adana.

After almost 30 years without any trams, Turkey is experiencing a revival in trams. Established

in 1992, the tram system of Istanbul earned the best large-scale tram management award in

2005. Another award winning tram network belongs to Eskişehir, (EsTram) a city with a new

tram system opened in 2004. Several other cities are planning or constructing tram lines, usually

with modern low-floow trams.

By 2014, there have been 12 cities in Turkey using metro, light rail and tram systems. They are

Istanbul, Izmir, Ankara, Bursa, Eskisehir, Kayseri, Gaziantep, Konya, Samsun, Adana, Antalya and

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Adapazari. The total network is more than 500 kilometers and the rolling stock exceeds 1800 by

now.[6]

One example of something in between Metro and trams is the "Ankaray" system in the city

of Ankara, Turkey. Ankaray is called "light metro", but the vehicles are clearly heavier and longer

than usual trams, and also mostly underground and grade-separated. It could be called a metro

but isn't since there is a separate system called Ankara Metro.

Cities with Light Rail

Transit systems: Istanbul, Ankara, Bursa, Adana, Izmir, Eskişehir, Konya, Antalya, Kayseri, 

Gaziantep, Samsun

Roads

There are numerous private bus companies providing connections between cities in Turkey. For

local trips to villages there are dolmuşes, small vans that seat about twenty passengers. As of

2010, number of road vehicles is around 15 million. The number of vehicles by type and use is as

follows.[7]

Car 7,544,871

Minibus 386,973

Bus 208,510

Small truck 2,399,038

Truck 726,359

Motorcycle 2,389,488

Special Purpose vehicle 35,492

Tractor 1,404,872

Total: 15,095,603

Waterways : 1200 KM

Pipelines : Gas 10,706 km; Oil 3,636 km; Total:14,342 km

Main Ports and Harbors:

Black Sea

Hopa Inebolu Samsun Trabzon Zonguldak

Aegean Sea

İzmir

Mediterranean Sea

16

İskenderun Mersin Antalya

Sea of Marmara

Gemlik

Bandırma

Istanbul

İzmit

Derince

Merchant Marines:

Total: 565 ships (1,000 gross register tons (GRT) or over) totaling

4,663,353 GRT/7,039,492 tonnes deadweight (DWT)

ships by type: by type: bulk carrier 96, cargo ship 262, chemical tanker 58, combination ore/oil

1, container ship 30, liquefied gas 7, passenger 4, passenger/cargo ship 48, petroleum

tanker 32, refrigerated cargo ship 1, roll-on/roll-off 25, specialized tanker 1

foreign-owned: 8 (China 1, Cyprus 2, Germany 1, Italy 3, UAE 1)

registered in other countries: 470 (Albania 1, Antigua and Barbuda 7, Bahamas 5, Belize 11,

Cambodia 20, Comoros 8, Cyprus 1, Dominica 9, Georgia 23, Isle of Man 2, Italy 1, Kiribati 1,

North Korea 1, Liberia 7, Malta 143, Marshall Islands 41, Netherlands Antilles 12, Panama 53,

Russia 70, Sierra Leone 7, Slovakia 11, St Kitts and Nevis 13, St Vincent and The Grenadines 20,

Tuvalu 1, UK 2, unknown 3) (2007)(Link:[1])

Airports and Airlines :

Last year, 180 million passengers used air travel to or within Turkey.  Due Turkey's

location at the crossroads of Europe and the Middle East, air travel is at an all-time

high. With the ever-continuing growth of tourism and more passengers looking to access

Turkey, it's unlikely this number will grow.

Turkish airports are very accessible and spaced out evenly across the country. There are

currently 57 airports in Turkey as of the beginning of 2016, of these airports, 33 offer

both domestic and international flights, while 13 offer regional flights across Turkey.

17

Turkey's national carrier, now private, Turkish Airlines, covers all of these airports from

most major airports in Europe, USA, Russia, Far East and the Middle East.  

Map of Airports:

18

19

2. ECONOMIC OUTLOOK

2.1. Economic Situation

The Turkish economy has shown remarkable performance with its steady growth over the last

decade. A sound macroeconomic strategy in combination with prudent fiscal policies and major

structural reforms in effect since 2002 has integrated the Turkish economy into the globalized

world, while transforming the country into one of the major recipients of FDI in its region.

 

The structural reforms, hastened by Turkey’s EU accession process, have paved the way for

comprehensive changes in a number of areas. The main objectives of these efforts were to

increase the role of the private sector in the Turkish economy, to enhance the efficiency and

resiliency of the financial sector, and to place the social security system on a more solid

foundation. As these reforms have strengthened the macroeconomic fundamentals of the

country, the economy grew with an average annual real GDP growth rate of 4.7 percent over the

period of 2002 to 2014.

 

Average Annual Real GDP Growth (%) 2002-2013

 

 

Source: OECD, Eurostat and national sources

 

20

Moreover, Turkey’s impressive economic performance over the past decade has encouraged

experts and international institutions to make confident projections about Turkey’s economic

future. For example, according to the OECD, Turkey is expected to be one of the fastest growing

economies of the OECD members during 2014-2016, with an annual average growth rate of 3.6

percent.

 

Annual Average Real GDP Growth (%) Forecast in OECD Countries

2014-2016 

 

 

Source: OECD, February 2015

Together with stable economic growth, Turkey has also reined in its public finances; the EU-

defined general government nominal debt stock fell to 33.5 percent from 67.7 percent between

2003 and 2014. Hence, Turkey has been meeting the “60 percent EU Maastricht criteria” for

public debt stock since 2004. Similarly, during 2003-2014, the budget deficit decreased from

more than 10 percent to less than 3 percent, which is one of the EU Maastricht criteria for the

budget balance.

 

As the GDP levels increased to USD 800 billion in 2014, up from USD 305 billion in 2003, GDP

per capita soared to USD 10,404, up from USD 4,565 in the given period.

21

 

The visible improvements in the Turkish economy have also boosted foreign trade, while

exports reached USD 158 billion by the end of 2014, up from USD 47 billion in 2003. Similarly,

tourism revenues, which were around USD 14 billion in 2003, exceeded USD 34.3 billion in 2014.

 

Significant improvements in such a short period of time have registered Turkey on the world

economic scale as an exceptional emerging economy, the 16th largest economy in the world and

the 6th largest economy when compared with the EU countries, according to GDP figures (at

PPP) in 2013.

 

Institutionalized economy fueled by USD 144 billion of FDI in the past decade

16th largest economy in the world and 6th largest economy compared with EU countries in

2013 (GDP at PPP, IMF-WEO)

Robust economic growth with an average annual real GDP growth of 4.7 percent during 2002-

2014

GDP reached USD 800 billion in 2014, up from USD 305 billion in 2003

Sound economic policies with a prudent fiscal discipline

Strong financial structure resilient to the global financial crisis

Outlook :

GDP growth is projected to increase from 3% in 2015 to above 4% in 2017, as political

uncertainties are assumed to fade, employment continues to rise, and the exchange rate

depreciation and the gradual strengthening of global markets support export growth. The

geopolitical crisis at the southern border and the associated influx of refugees pose challenges.

Currency depreciation until October has strengthened price competitiveness, but has also

weakened household confidence, created pressures on corporate balance sheets and added to

already high inflation.

Large external funding needs and volatile international capital market conditions warrant cautious

macroeconomic policies. Monetary policy should remain tight to ensure inflation is controlled, and

it may have to be tightened if inflation remains persistently above target. Room is probably

available for fiscal support, although shortcomings in fiscal transparency at the general

government level make judgments in this area difficult. Progress in implementing programmed

structural reforms will be crucial to rebalance demand and strengthen growth.

22

Turkey’s carbon footprint per capita is lower than in the more advanced economies, but is growing

at one of the fastest rates in the OECD area. The government’s recent announcement of a

quantitative emission path for the period 2020-30 should help to set concrete energy efficiency

measures, such as stronger harmonisation of tax rates on fuels in different uses, and will promote

investment in renewable energy.

2.2. Statistics

The Turkish Statistical Institute is responsible for the country statistics data; founded of the

Statistics Council and the Presidency of the Turkish Statistical Institute with Statistics Law of

Turkey numbered 5429. The Statistics Council is established to advice on the development and

implementation of the Programme and on the production and use of official statistics; to

determine and assess the areas in which official statistics are needed and to provide opinions

and suggestions for future works to be carried out. The Presidency of the Turkish Statistical

Institute consists of central and provincial organizations to implement this law and to perform

tasks assigned by it.

The main duty of the Statistics Council established by Statistics Law of Turkey numbered 5429 is

to advise on the development and implementation of the Programme and on the production and

use of official statistics; to determine and assess the areas in which official statistics are needed

and to provide opinions and suggestions for future works to be carried out. 

23

The President of Turkish Statistical Institute is the President of the Council which consists of

various official institutes, organizations and non-governmental organizations. The Law foresees

that the Council meets at least once a year.

WebPage: http://www.turkstat.gov.tr/Start.do

2.3. Monetary Policy

Turkey was also adversely affected by the declining external demand and falling international

capital flows.

Monetary policies of the Turkish Central Bank played a crucial role in securing macroeconomic

balances, and most importantly reining in inflation over the last decade. Having been one of the

major concerns of the Government for more than 3 decades, inflation has finally been brought

down to single digits by mid-2000s. CPI inflation was % 6.16 last year. It is forecasted to settle

down around % 5 in 2014.

The Bank uses policy rates and other monetary policy instruments to meet inflation

targets through controlling aggregate demand and inflation expectations. Inflation forecasts of

the Bank are also important in inflation targeting as a tool for steering inflation expectations.

24

Inflation forecasts of the CBRT are publicized through Inflation Reports published in January,

April, July, and October.

The Monetary Policy Committee, consisting of seven members, meets monthly on pre-

announced dates to make policy rate decisions. Monetary Policy Committee decisions are

publicized on the day of the meeting at 2:00 p.m., and a summary of the issues discussed in the

meeting are published within 5 working days.

The CBRT is also delegated to take measures for maintaining the stability of the financial system,

in addition to the primary objective of price stability. To this end, the Bank, starting from late

2010, developed a new monetary policy framework by building on the inflation targeting

framework in order to contain macro-financial risks due to global imbalances.

Within this new framework, the Bank started to address macro-financial risks as conditions

permit, while still preserving price stability as the overriding objective. The Bank uses a

combination of policy instruments to attain the instrument diversity that is needed to attain its

multiple objectives. These policy instruments are the one-week repo auction interest rate (i.e.

the policy rate), the interest rate corridor between the overnight lending and borrowing rates at

the Interbank Money Market and the İstanbul Stock Exchange Repo-Reverse Repo Market.

Fiscal Discipline

Turkey has been extremely careful with its budget for the last decade. Once peaked at almost %

17 in 2001, EU-defined general government budget deficit/GDP ratio was % 2.6 in 2011 and

Turkey met the Maastricht criteria of % 3 while outperforming 18 EU Countries (Central

government budget deficit/GDP ratio was % 1.3 in Turkey in 2011 and Turkey outperformed 23

EU Countries).

While net public debt to GDP ratio was % 90.5 in 2001, it decreased to % 39.4 in 2011, which

was below the level in 21 EU Countries and the Maastricht Criterion of % 60. The composition of

the debt stock has also been improved and become more resilient to fluctuations in interest and

exchange rates as well as capital flows.

25

Reserves

Turkey’s international reserves have continued to increase throughout the last decade. The

Central Bank international reserves reached 100,3 billion dollars by the end of 2012. FDI inflows

and portfolio transfers are the main driving force behind considerable expansion in reserves.

2.4. Foreign Trade

Turkey has been pursuing an export-led growth since 1980. By virtue of economic reforms,

restrictions on imports have been lifted, safeguard practices were reduced, and foreign exchange

transactions were liberalized.

As a result of the economic reforms carried out during the last decade, both the volume and

composition of the Turkish trade have radically changed. The volume of Turkish exports

increased to 152,6 billion USD in 2012 from 36 billion USD in 2002.

The total trade volume accounted for 389.1 billion USD in 2012. Exports increased by % 13.9 on

an annual basis up to 152,6 billion USD. Imports shrank by % 1.6 decreasing to 236.5 billion

USD.

In 2014, Turkey’s exports reached an all-time high; hitting approximately USD 157.6 billion, with

an increase of 4 percent.

Due to the implementation of the liberalization process since the 1980s, the Turkish economy

has experienced a period of substantial growth. Foreign trade, in respect of both exports and

imports, has grown rapidly and notable changes in the structure of exports have been observed.

In this regard, industrial products have gained prominence over agricultural products.

26

 

Turkey became a member of the World Trade Organization (WTO) in 1995. Following this move,

it finalized an agreement with the European Union, enabling it to join the Customs Union on

January 1, 1996.

 

Exports

 

In line with the policies implemented as part of the export-led development model followed

since 1980, exportation has become important to Turkey in both qualitative and quantitative

terms.

 

Starting in particular in 1980 and continuing up to the mid-1990s, significant developments

have been observed in the market share held by labor-intensive industrial products such as

textiles and clothing, iron and steel, and foodstuffs.

 

In 1996, following the establishment of a Customs Union with the European Union, Turkey's

exports entered a new structural transformation process. Developments in recent years show

that production and exportation have increased substantially in high-technology sectors, where

goods include electrical and electronic machinery and equipment, as well as in the automotive

industry. In this respect, it can also be observed that the export market share of manufactured

industrial products has increased.

27

Imports

 

The Turkish import regime highlights the liberalization of Turkish imports in line with its

commitment to complete the Customs Union with the EU, its relationship with EFTA, and its

obligations under the World Trade Organization (WTO). Turkey has placed special emphasis on

its commitment to reduce customs duties in order to align itself with the Common Customs

Tariff. Turkey has made some necessary modifications to its import regime, and by January 1,

1996 the Customs Union with the EU became effective.

 

The basic aims of Turkey’s import policy since the early 1980s can be summarized as follows:

 

To reduce protectionist measures in conformity with the new GATT rules

To reduce bureaucratic procedures

To secure a supply of raw materials and intermediary goods at suitable prices with certain

quality standards

 

28

2.5. Trade with Thailand

Turkey established diplomatic relations with Thailand in 1958 and opened her Embassy in the

same year. The Thai Embassy in Turkey was opened in 1972.  The relations between Turkey and

Thailand are advancing through a positive agenda thanks to reciprocal high level visits and

contacts. 

H.E. Foreign Minister Çavuşoğlu visited Thailand in March 2015. It was the first Foreign Minister

level visit after an 25 year interval. 

The bilateral trade volume went up eight fold, from 200 million USD in 2002, to nearly 1,5 billion

USD in 2014. Turkey’s exports reached 210 million USD and imports amounted to 1,277 billion

USD in 2014.

Turkey’s primary import products are machinery, boilers, vehicles other than railway and

tramway rubber and articles thereof, plastics and articles thereof, manmade staple fibres.

Turkey’s imports are mainly composed of machinery, boilers, wheat gluten, textile goods, iron

and steel.32 Turkish companies operate in Thailand while, 15 Thai companies operate in

Turkey. 

The Business Council and Joint Economic Comission (JEC) convened three and four times

respectively since their establishment.

The Free Trade Agreement (FTA) negotiations between Turkey and Thailand is to start in

February 2016.

Istanbul-Bangkok route is one of the busiest routes of Turkish Airlines (THY). With a total of 14

flights per week, the line is also one of the most profitable routes of THY. Every year more than

40.000 Turkish citizens visit Thailand. 

During the 2014-2015 academic year, 48 Thai students studied under Türkiye Scholarships at

various Turkish universities. 

A total of 766 Thai citizens are registered to be resident in Turkey while around 1000 Turkish

citizens reside in Thailand as of 2014.

29

Turkey Imports from Thailand (Product)

Turkey Imports from Thailand (Quantity)

30

Turkey Exports to Thailand (Product)

Turkey Exports to Thailand (Quantity)

31

2.6. Import Regulations

Turkey as a founding member of the WTO, believes that the universally agreed international

trade system, which is embodied within the WTO and based on the principles of reciprocity and

non-discrimination can serve the interests and welfare of the whole global community. The

liberalization of trade at regional or bilateral level can also contribute to liberalization and trade

expansion in the global context. Therefore, Turkey, with its wide range of economic and social

approaches, bridging very different regions of the world, considers establishing bilateral and

regional trade relations as valuable opportunities to enhance trade liberalization. Turkey's

foreign trade policy is fully committed to the liberalization of trade at multilateral level. There

can be no doubt that the basic guideline that Turkey follows in its bilateral and regional trade

relations is that international trade should be carried out in line with the spirit of the WTO. This

entails the gradual opening up of markets on the basis of reciprocity and non-discrimination. As

long as the basic principles of the multilateral trading system are fully respected, trade

liberalization, both regionally and bilaterally, will not interfere in any way, but rather strengthen

the benefits of the multilateral trading system The most significant phenomenon in Turkey's

foreign trade policy is the Customs Union established between the EU and Turkey as of

01.01.1996.

This development initiated the period needed for the legal infrastructural consistency of foreign

trade strategy with the EU's norms, and thus both import and export regimes have been made

consistent with the regulations of the EU. In accordance with the provisions of the Association

Council Decision No.1/95 dated 6 March 1995, Turkey had committed to align itself

progressively within five years starting from 1.1.1996.

Within the context of the Association Council Decision, Turkey gave priority to preferential

agreements with the following countries: Hungary, Bulgaria, Poland, Romania, Slovakia, the

Czech Republic, Israel, Estonia, Latvia, Lithuania, Slovenia, Morocco, Tunisia, Egypt and Malta. To

date, The Turkish Government has signed 17 preferential trade agreements and the Free Trade

Agreement between Turkey and the EFTA States which came into force in April 1992 was the

first step on the way to the adoption of the preferential regimes of the EU. Other FTAs (Free

Trade Agreements) are listed chronologically as follows:

Israel (May 1997), Romania (Feb. 1998), Lithuania (March 1998), Hungary (April 1998), Estonia

(July 1998), the Czech Republic (Sept. 1998), Slovakia (Sept. 1998), Bulgaria (Jan 1999), Poland

(May 2000), Slovenia (June 2000), Latvia (July 2000), Macedonia (Sept. 2000), Croatia (July

2003), Bosnia and Herzegovina (July 2003), The Palestine Autonomous Administration (June

2005), Tunisia (July 2005), Morocco (January 2006).

32

As a result of the accession of Lithuania, Hungary, Estonia, the Czech Republic, Slovakia, Poland,

Slovenia and Latvia as full members of the EU, FTAs between Turkey and these countries came

to an end after April 30, 2004. FTA negotiations still continue with Egypt, the Faroe Islands,

Lebanon, Albania, and the Republic of South Africa. In addition to these progresses, the new

Customs Law Nr 4458 that is adapted from the EU Customs Code and the new law for combating

with smuggling which states to impose pecuniary offence for offenses related to foreign trade

has been entered into force.

With the new Customs Law (CL), harmonization with the EU Customs Code has been achieved

for the topics listed below;

• Origins of Goods, • Customs Valuation of Goods, • Presenting of goods to the Customs Authority, • Customs Declaration, • Release for Free Circulation, • Suspension List • Customs Procedures with Economic Impact, • Free Circulation• Customs Debt, • Application

Also important steps have been taken in the automation of customs. French customs software

named 'SOFIX' has been purchased, developed and adapted. %99.5 of foreign trade volume is

now processed by automated customs authorities. The automation system also allows traders to

register their customs declarations by using EDI. By the end of 2005, 70% of customs

declarations are registered via EDI.

Automation system enables customs administration to make risk analysis and decrease the

physical inspection rate. In 2005, customs formalities of 96% of export declarations and %77 of

import declarations were completed in 24 hours. Customs automation system is also a core

point for e-state and e-trade activities in Turkey. e.g. Two way electronic communication has

been established between revenue administration-customs and between exporter associations-

customs.

These progresses are the main impulsive force behind the increase of Turkish foreign trade

volume and the attractiveness of Turkey for foreign investors. (Volume of the Turkish foreign

trade increased from 67 billion $ in 1999 to 190 billion $ in 2005.)

33

Foreign Trade Regime

Undersecretariat for Foreign Trade is assigned to regulate all aspects of foreign trade and

Undersecretariat for Customs is tasked with implementation of these regulations at the borders.

In addition to these two administrations, Ministry of Finance as a regulatory authority of tax

issues and Undersecretariat for Treasury as a regulatory authority of exchange regime are the

other institutions that have influence on the foreign trade regime of Turkey.

Main legal documents that constitute the Turkish Foreign Trade and Customs legislation are;

Customs Law Nr. 4458

Import Regime Decree

Export Regime Decree • Decree on the Regime of Technical Regulations and

Standardization

Law On The Protection Of the Value of Turkish Currency

Free Trade Zone Law Nr. 3218

Combating with Smuggling Law Nr. 4926 • Value Added Tax Law Nr. 3065

Special Consumption Law Nr. 4760

In terms of country, types of trade or nature of goods, some kinds of documents such as control

certificate or export/import permissions may be required for importation into or exportation

from Turkey.

These documents are issued by below mentioned administrations in line with the nature of

goods;

• Ministry of Environment and Forestry

• Ministry of Agriculture and Rural Affairs

• Ministry of Health

• Ministry of National Defense

• Ministry of Industry and Commerce

• Ministry of Interior • Undersecretariat for Foreign Trade

• Energy Market Regulatory Authority

• Turkish Standardization Institute

• Turkish Atomic Energy Authority

• Telecommunications Authority

• Exporter Associations

34

2.6.1. Import Regime

Turkey maintains a transparent and open trade regime regulated by Undersecretariat for

Foreign Trade (UFT). Import Regime Decree is prepared every year by UFT, published in the

Official Journal, dated 31 December, and came into force as of 1 January. 2.1.

Importers

Every natural or legal person that owns tax ID number can be an importer. However according

to customs legislation, importers must submit an information file that includes, registration

certificate for council of commerce or industry, copy of Trade Registry Gazette, list of authorized

signatures and power of attorney 1 to the related customs administration .

Import Regime Decree

The Import Regime reflects both Turkey's international rights, obligations and the country's

economic needs, it has been prepared by taking into account the agreement establishing the

World Trade Organization (WTO), the Customs Union Agreement between Turkey and the

European Union, the free trade agreements signed with various countries, the preferential

treatments granted by Turkey to the least developed countries and some developing countries

within the framework of generalized system of preferences and also the specific needs and

requirements of the agricultural and industrial sectors.

There are 5 lists that are annexed to the Import Regime Decree; goods are classified in the list I,

II, III and IV according to their features and list V contains goods that are suspended. In these

lists (I, II, III, IV), rates of the customs duties for countries and country groups are indicated

separately in different columns.

If the goods are listed in both list II and V, lower duty rate is applied. The customs duty rates

applied on the industrial components of the processed agricultural products which are indicated

in List III are aligned to the EU's common customs tariff rates. Regarding the provisions of the

Decision No:1/95 on the EU-Turkey Customs Union, Turkey has to apply simultaneously the EU

common external tariff (CET) for most imports of industrial products and for the industrial

component of processed agricultural products imported from the third countries. In this context,

35

tariff reductions of the EU's towards the third countries are reflected by Turkey to the products

covered in List: II of the Import Regime Decree.

GSP of Turkey

According to the provisions of the Customs Union Agreement, Turkey had to align its

preferences with the EU's preferences under the Generalized System of Preferences (GSP) which

regulates autonomous customs duty preferences in favor of the least developed countries and

some developing countries.

The EU's such tariff preferences to these countries are reflected in list II of the Import Regime

Decree. Turkey enacted a Decree on August 25, 2004 and with this Decree all industrial products

covered by the EU's GSP Regime are included into Turkey's GSP. As a result, Turkey has fully

completed the adoption of the EU's GSP Regime in terms of countries and products.

Suspension List

The “suspension list” has been rearranged in cooperation with the EU and those goods are

indicated in List-V. This List shows either reduced or mostly suspended customs duties applied

to imports of certain products predominately used as raw material or intermediate inputs in

chemical and electronic industries.

End Use Products

End use products of the European Union, has been indicated in Lists I, II and V with the symbol

(a) added to the end of the item description.

Import Licenses

As a general rule, import licenses or permits are not required for imported goods. Yet, public

authorities have the power to regulate and monitor the imports of certain goods on grounds of

public morality, public policy or public security; the protection of health and life of humans,

animals or plants or the protection of industrial and commercial property.

These kinds of issues are arranged by several communiqués which are also published in Official

Gazette. Import licenses or permits required under the Import Regime Decree and

Communiqués are as follows.

36

37

Marking and Labeling of Imported Goods

There is a national mandatory standard “TS 4331 on The Marking and Labelling of Packages”

which is still in force. However, this standard does not differentiate between domestic and

imported products.

Other Legislation Related to Import

38

In addition to the above mentioned, there are legislations (they are also decrees and

supplementary legislations) related to safeguards, protection of Turkey's commercial rights and

prevention of unfair competition that takes root from import.

2.6.2. Export Regime

Turkey has been implementing an export-oriented strategy since 1980s, therefore many liberal

arrangements have been made and some support programs have came into effect in order to

improve export of Turkey.

Related to particularly support of exports, policies of the foreign trade strategy that was set up

under the conditions of 1980s have been reviewed and modified in view of the developments

taken place in the world and Turkey in the 1990s.

In this respect, State Aids prepared in compliance chiefly with the World Trade Organization and

our international commitments were put into practice as of 01.06.1995. Contemporary Export

Regime is regulated by; Export Regime Decree dated 06.01.1996, Decree on State Aids for Export

dated 11.01.1995, Inward Processing Regime Decree dated 27.01.2005, export related

provisions of Decree on Regime of Technical Regulations and Standardization for Foreign Trade

dated 01.02.1996, and their supplementary legislations.

All goods, other than those whose exportation is prohibited by international agreements, laws,

and, decrees, can be freely exported within the framework of the Export Regime Decree.

However within the framework of the World Trade Organisation rules and Turkey EC

Association Council Decision No. 1/95 (Article 7), restrictions and prohibitions on exports may

be imposed in the cases of market turmoil, scarcity of goods, and on the grounds of public

morality, public policy, public security, protection of the health and life of humans, animals and

plants, protection of artistic, historic or archaeological assets.

Exports of some items are prohibited like indian hemp, cultural and natural assets, etc. and

permission is required for the exports of some items like war weapons, opium, addictive and

psychotropic substances, etc. Moreover, some exports are subject to registration under UN

Resolutions, Vienna Convention on Protection of Ozone Layer, etc.

Exporters

Every legal person, natural person or joint-venture that owns tax ID number and is a member of

related exporter association can be an exporter.

Exporter Associations

39

Exporters' Associations are professional establishments, which deal with all of the export

activities at the export intensive regions. They have very important roles in export system of

Turkey. There are 59 Exporter Associations and 13 General Secretariat of Exporter Associations

all around the Turkey.

They are affiliated to Undersecretariat for Foreign Trade, but since their board of directors is

elected from the representatives of member firms, they are evaluated as semi-governmental

organizations. All export declarations should be approved by related exporter association before

they are submitted to the customs authorities.

Exporters can submit their declarations to both customs administrations and associations by

EDI. Since there is a data line between customs server and exporter associations, it is not

necessary for exporters to send their customs declarations physically to associations for

approval.

Types of Exportations

Types of exportations that are defined in the Export Regulation are;

Technical Regulations and Standardization for Export

According to the Decree on the Regime of Technical Regulations and Standardization,

agricultural products such as fresh fruits and vegetables, dry and dried fruits, legumes, edible

vegetable oils, and cotton within the scope of approximately 70 standards are subject to

standardization and commercial quality controls in exports.

These controls are carried out by the inspection units called as “Inspectorates of Standardization

for Foreign Trade”, within the 8 Regional Directorates (Marmara, Western Anatolia, South

Anatolia, Eastern Black Sea, Western Black Sea, South Eastern Anatolia, Central Anatolia and

Eastern Anatolia) working under the UFT.

40

The standards that are mandatory in exports are parallel to the UN/ECE standards and the

inspections are performed according to the OECD Scheme. Following the inspection carried out

by the inspectors, a “Control Certificate” is given to the exporter if the product is found to be in

conformity with the relevant standard.

The exporter cannot export the product without a Control Certificate. The products may be

exempted from inspection if the exporter owns the Certificate of Competence on Commercial

Quality Inspection. Certificate of Competence on Commercial Quality Inspection is a certificate

issued by the UFT for the producers who are found to be competent to carry out the inspections

by themselves. These firms are subject to periodic and random controls by the Inspectorates.

2.7. Logistics System

Turkey, one of the most vibrant economies among emerging countries, has been a natural bridge

between the East and the West, serving as a junction between the continents of Asia and Europe.

 

Turkey’s strategic location provides access to multiple markets with 1.6 billion people, a

combined GDP of USD 27 trillion and more than USD 8 trillion of foreign trade which

corresponds to around half of the total global trade. Trade in Turkey has been rising significantly

and the region has more of a presence in global trade. In 2014, almost 1.1 percent of the global

trade volume was conducted by Turkey, and the country’s share in global trade is expected to

exceed 1.5 percent by 2025.

 

The Turkish economy, which has been growing at an average annual growth rate of almost 5

percent over the last 12 years, provides many opportunities for the logistics sector. In addition

to its robust economic growth, Turkey has one of the largest and youngest labor pools in Europe

with more than 65 percent of its population aged between 24 and 54. The strength of Turkey’s

labor force is reflected in the logistics industry. Investors can easily hire a talented workforce at

a competitive cost to address the complex demands of the industry.

 

Both public and private infrastructure investments in the last ten years have significantly

improved the logistics services provided in the country. Many new airports have been built, dual

carriageways have spread across the country, the high-speed train network has started to reach

major cities and the capacity of Turkish ports has been increased. The Turkish government has

set challenging targets to be achieved by 2023 for improving the logistics infrastructure even

more. These targets include, but are not limited to:

 

Building an additional 15,000 km of dual carriageways and highways

41

Increasing the shares of railway transportation to 10 percent and 15 percent in passenger and

freight transportation respectively

Building an additional 9,000 km of high-speed train lines

Constructing new airports with a total annual capacity of 400 million passengers

Increasing the share of sea freight transportation to 10 percent in total freight transportation

and containerization by 15 percent

Building three large ports in each seas surrounding Turkey

 

Turkey’s advantageous geographical location, which provides easy access to Eastern Europe,

Central Asia, the Middle East and North Africa, allows the country to function as a hub for over

USD 2 trillion worth of freight carried in the region. Turkey’s current logistics industry size is

estimated to be USD 80-100 billion and is forecast to reach USD 150-200 billion by 2023.

 

Turkey is also building logistics centers/villages that will serve to lower the costs of

transportation by offering various different modes of transportation within these

centers/villages. It is estimated that, by 2023, the total freight carried in the centers/villages will

reach a total of USD 500 billion.

a- Road Logistics

In Turkey, roadways are the predominant mode of transportation of freight and passenger

cargo. Turkey has one of the most developed road network in its region. As a result, cargo

handling and transport has been in expansion.

The growth of freight and passenger transported via road has been impressive. The tonnes-km

and passenger-km grew with a CAGR of 3.57% and 4.36%, respectively from 2007 to 2012.

Over the medium term the freight carried via roadways is expected to continue its growth with a

CAGR 3% and reach 251.7 million tonnes-km.

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b- Maritime Logistics

The freight handling capacity in Turkey’s ports has been steadily increasing over the years.

Consistent high growth rates were achieved in total freight handling in Turkish ports as it grew

at a CAGR 8.2% from 2003 to 2012. 56% of the goods handled were freight discharged in ports,

while 29% was freight loaded into vessels and around 15% was transit cargo.

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This increase can be attributed to a wide range of services that ports provide:

Turkish ports can handle a variety of cargo, including bulk cargo, general cargo, container and

liquid bulk cargo.

The majority of cargo handled was liquid bulk cargo with more than 132 million tonnes in 2012,

followed by bulk cargo in excess of 107 million tonnes, during the same period.

Kocaeli ports emerged as the leading ports in cargo handling. This can be attributed to their

proximity to manufacturing and business centers. Izmit’s port had the highest share in cargo

handling with 16% of the total freight handled in all of the ports.

Ambarlı’s port handled more than 3 million TEU of containers in 2012, coming in as the top

container handler among Turkish ports, followed by Mersin with over 1.2 million TEU and Izmir

with approximately 700,000 TEU. Thus, Ambarlı constituted 42% of the total number of

containers handled in Turkey.

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Since a significant portion of foreign trade passes through ports;

Turkey’s significance in international trade was reflected in its foreign trade freight handling

numbers. Total foreign trade freight handling grew CAGR 7% from 2003 to 2012 surpassing 280

million tonnes.

In 2012, foreign flagged ships constituted 86% of the total freight carried, while the rest

belonged to Turkish flagged ships. That is a CAGR 9% increase in foreign flagged ships from

2003 to 2012.

Total volume of exports during 2003 to 2012 grew at a stunning CAGR 8%, with more than 90

million tonnes in 2012. The imports during the same period grew at a CAGR 7% reaching 193

million tonnes.

In 2012, 18.2% of maritime exports were made to Egypt followed by Italy and Russia with

17.3% and 11.1%, respectively. The majority of Turkey’ imports came from neighboring Russia

followed by the Ukraine, the USA and Egypt.

Total traffic in ports has more than doubled in the past 8 years thanks to increasing trade.

Ports provide an interface between sea transport and land based transport. Ports represent a

great opportunity in Turkey, given the country’s more than 8,200 km of coastline.

Currently, there are more than 50 ports in Turkey. • Turkish ports are structured in order to

serve multiple types of loads.

In 2012, in terms of TEU, containers held in Türklim ports, which are the ports that are

members of the Port Operators Association of Turkey, constituted the major share with 87% of

total traffic.

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PPPs have fired up the Turkish maritime sector

Güllük (BOT), Çanakkale (BOT), Gökçeada and Pasaport Pier are to be private boating ports.

Some of the other yachting ports are Dalaman, Datça, Gazipaşa, Muğla-Oren, and Kumkuyu.

The Derince Port, Izmir Cruiser Port, Izmir Loads Ports and Tekirdağ Port are to be used for

commercial use and become transportation and logistics bases.

The tenders for these ports have not been conducted.

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Total traffic in ports increased at a CAGR

11% from 2004 to 2012. During the same

period, traffic in Türklim ports increased at

a CAGR 16%.There are 60 customs

directorates for sea border crossings, of

which 14 directorates are temporary.

TCDD is a big player in ports and controls some of the major ports in Turkey:

Currently, TCDD operates 3 ports, namely, Haydarpaşa, Derince and Izmir ports. Ports such as

Bandırma, Iskenderun, Mersin and Samsun were privatized using the transfer of operating rights

method.

The biggest of these ports is Haydarpaşa. It has an extensive capacity includes technology of,

bulk freight handling facilities and ferry boats that provide service to train ferries working

between Sirkeci and Haydarpaşa.

The Haydarpaşa port handled almost 4 million tonnes of freight in 2012, while Derince and

Izmir handled close to 2 million tonnes. The main type of cargo handled in these ports was

containers.

c- Air Logistics

Turkey’s air transportation market has significant growth potential and is keen on development

through past years.

Air transport revenue includes passengers and freight transferred via air.

The total air transport market size increased at a CAGR 14% from 2006 to 2011 and reached a

value of more than USD 8.8 billion by 2011.

EU standardizations and the privatization process enabled the deregulation of the industry.

Currently, there are more than 80 companies actively operating in the air transport sector.

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Even with the increasing cost pressure due to high jet fuel prices, profit margins were stable and

reached 13%, in 2011.

Meanwhile, the rapidly growing industry created over 4,000 new jobs throughout 2006-2011.

Euromonitor International expects the industry to continue expanding at an annual rate of 13%

between 2012 and 2017.

Furthermore, daily airline traffic is expected to double between 2012 and 2030.

As air freight and passenger transportation continues to grow;

Air transportation is becoming a widely used mode of transport as people and companies rely on

fast ways to transport their goods.

Freight carried via air transportation has increased at a CAGR 10% from 2003 to 2012.

As more airports open and existing airport capacities increase, freight carried via air will

increase. Future air freight trends also point towards larger growth in this mode of

transportation. Air freight industry is expected to continue grow at a CAGR 9.4% from 2012 to

2016, reaching to a total of 3.2 million tonnes.

The biggest portion of the freight carried comes from international lines. These lines constitute

around 72% of the total freight carried in 2012.

Currently, Atatürk Airport in Istanbul has the largest capacity and is the most significant airport

in Turkey. More than half of the total air freight in 2012 passed through Istanbul Atatürk Airport.

Parallel to the increase in air carriers and passengers in Istanbul Atatürk Airport, the total

amount of freight surpassed 1.2 million tonnes in 2012. That is a 15% increase from 2011.

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The passenger traffic increased by a CAGR 16% from 2003 to 2012 with over 130 million

passengers carried in 2012.

Istanbul Atatürk International Airport was the seventh busiest airport in Europe in terms of

passengers in 2012.

The industry will further profit from the new planned airport that will replace Atatürk

International Airport. The new airport will be far more superior in technology and will have

more capacity than its predecessor.

Total number of customs directorates in air border crossings is 49. 21 of the directorates are

temporary.

d- Railway Logistics

Turkish State Railways (TCDD) is the national railway carrier, established in 1953. It is

headquartered in Ankara and operates through seven regional directorates countrywide.

Moreover, TCDD operates sea ports and has three affiliated companies including

• locomotive manufacturer, Tülomsaş,

• passenger coach producer, Tüvasaş, and

• freight wagons maker, Tüdemsaş.

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In 2012, more than 25 million tonnes of freight was transferred via railway. That is a CAGR 2%

increase from 2008. The majority of this load were domestic freight, while only 8% was

international. However, as international connectivity of railroads increase international freight

handling will also increase.

According to Deloitte analysis, Turkey’s train freight volume is set to grow CAGR 3.2%

surpassing 29 million tonnes between 2012 and 2017. Tonne kilometer, which is a critical

performance indicator for modes of transport, increased for railroads CAGR 4.9% from 2002 to

2012.

Furthermore, Turkey plans to carry freight and passengers from hubs around the country via

high speed train networks that will be connected to international railroads.

Turkish State Railways (TCDD):

It operates freight and passenger transportation and is a part of the Ministry of Transport,

Maritime Affairs and Communications.

The TCDD is a vertically integrated company. Other than its transportation operations, it has

manufacturing and maintenance facilities. TCDD’s activities are extensive and diverse going

beyond railroad transportation.

It has three affiliates performing these services, namely, TÜLOMSAŞ (the Locomotive and Motor

Corporation of Turkey) based in Eskişehir which is a licensed locomotives manufacturer,

TÜVASAŞ (the Wagon Industry Corporation of Turkey) based in Adapazarı which manufactures

passenger coaches and TÜDEMSAŞ (the Railway Machines Industry Corporation of Turkey)

based in Sivas that manufactures freight wagons.

DLH, which is the General Directorate of Infrastructure Investments for the Ministry of

Transportation, Maritime Affairs and Communications designs, constructs and manages large

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A number of major cities have urban rail

networks, light transit systems and underground

subways of some sort. In Istanbul alone, there

are plans to provide more than 100 km of new

lines by the end of 2018 and over 270 km of lines

by the end of 2023.

Turkey sees railways as a preferred mode of

transportation for freight and is trying to identify

ways to increase its share.

infrastructure projects for the railway network such as the Ankara subway and the Marmaray

project.

The railway sector presents golden opportunities for investors such as:

Expansion of high speed railway network.

Rehabilitation of existing lines.

Modernization of infrastructure and technology.

Enhanced logistics and transportation operations.

TCDD also operates some of the biggest ports in

Turkey such as the Haydaparşa, Derince and Izmir

ports.

The acceleration of the industry is set to continue with the railway sector’s liberalization process

As of May 1, 2013, the new law associated with the liberalization of railway transportation in

Turkey breaks the monopoly of the state for rail networks and replaces it with a competitive and

free market environment. This law enables TCDD to act as the railway infrastructure operator

and it will establish TCDD Taşımacılık A.Ş within a few months*.

• The affects of the new law foresees improvement and expansion of the railway network with

investments from both private and public investors.

• The new law permits private and public companies to conduct: • Construction of the railways

which will be under authority of the said company.

• Operation of railway which is leased or constructed.

• Operation of trains using the state railway network.

• The Ministry of Transport, Maritime Affairs and Communications will grant operating rights to

private companies that want to build and operate railways to conduct freight and passenger

transportation operations.

• According to the law, "when companies want to construct railway infrastructure, the property

required for the railway infrastructure will be expropriated by the Ministry and cost will be

collected from the company and easement right will be given to company so as not to exceed 49

years".

• As investments due to liberalization process in railways speed up, an integrated network

among logistic villages, industrial zones and airports will boost Turkey’s economy even further.

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Railways are among the top priorities of the government of Turkey.

The government encourages private sector companies to work with TCDD to make faster

railways and create a better railway infrastructure.

Bringing public and private resources together for the development of railways, rail connectivity

to ports, logistics villages, factories and other manufacturing plants is a significant initiative.

Implementing the public-private model to railway development creates many assets. Some of

these assets are the workforce coming from partnership, better planning and implementation,

more funding, more expertise coming from mature experienced companies within the industry.

• One of the many opportunities that come with privatization and partnerships is connecting

railways to existing factories, trading companies, logistics centers and ports. Even after

exceeding the renting time and PPP is finalized, the partnerships between the public and private

sector will not cease.

• The method enables TCDD to reduce operating costs and increases efficiency since private

companies supply labor and equipment.

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2.7.1. Customs Procedures

The scope of the Customs Law is to lay down the customs rules that shall apply to goods and

means of transport entering into and exiting from the Customs Territory of the Republic of

Turkey.

According to the Customs Law; 'The Customs Territory of Turkey' is the territory of the Republic

of Turkey and The Customs Territory also includes the territorial waters, the inland maritime

waters and the airspace of Turkey.

'Person' means a natural person, and a legal person, as well as where possibility is provided for

under the rules in force, an association of persons recognized as having the capacity to perform

legal acts but lacking the legal status of a legal person.

'Customs-approved treatment or use of goods' means:

• the placing of goods under a customs procedure;

• their entry into a free zone; • their re-exportation from the Customs Territory of

Turkey;

• their destruction; • their abandonment to the Exchequer; 'Customs procedure'

means:

• release for free circulation;

• transit;

• customs warehousing;

• inward processing;

• processing under customs control;

• temporary admission;

• outward processing;

• exportation; 'Goods' means all kinds of material, product and value.

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According to article 5 of the CL; any person may appoint a representative in his dealing with the

customs administrations to perform the acts and formalities laid down by the customs

legislation. Such representation may be direct, in which case the representative shall act in the

name of another person, or indirect, in which case the representative shall act in his own name

but on behalf of another person. A representative must state that he is acting on behalf of the

person represented, specify whether the representation is direct or indirect and must produce

the evidence of his powers to act as a representative. Activities regarding the goods being

assigned one of the customs-approved treatments or uses can be proceeded and concluded

through direct representation by the owners of goods and by those who act on their behalf; or

through indirect representation by the customs certified customs brokers.

General Customs Procedures and Necessary Documents

When a customs declaration is submitted by a declarant or his representative, it is obligatory to

produce the original invoice and the value declaration form of the import goods before the

printed-out customs declaration has been given to the customs administration.

In addition to these, facultative or depending on the situation, a freight invoice and/or insurance

policy in accordance with the terms of payment, a Bill of Lading or Bill of Carriage, a packing list,

or in the case the application of the provisions of release for free circulation procedure is subject

to preliminary authorization or where the declarant wants to take advantage of the preferential

tariff, a control document or a certificate of origin, or other documents required under special

provisions such as the declaration form for processed agricultural products, should accompany

the declaration to be produced to the Customs Administration.

The documents to be attached to the declaration and/or produced before the submission of

goods or, in some cases, before the day on which customs liabilities occur are dependent on

and/or subject to the nature of the goods, the country or country group the goods are exported

to, bilateral or multilateral Agreements, terms of delivery, terms of payment, origin, and the

measures laid down by special provisions pertaining to trade, i.e. liabilities arising from

international agreements on trade of goods, or special arrangements designed by relevant

agencies in accordance with laws, decrees, regulations and similar legislation.

Additionally, certain specialised customs offices have been established to realize more effective

customs control in terms of valuation, tariff and standardization. Some goods must be imported

only from these specialized customs offices. Goods may be unloaded from means of transport at

places designated or approved by Customs, and under authorization given by the customs office

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concerned. No goods may be unloaded without producing a summary declaration or another

commercial or official document used as summary declaration.

However, in the case of an unavoidable danger where the goods have to be fully or partially

unloaded in urgency, an authorization may not be required. Such cases must be reported

without delay to the nearest customs office.

Keeping Legal Documents

All the documents and information must be kept for a period of 5 years for the purposes of

control by the customs authorities.

Customs Tariff and Tariff Classification of Goods

Harmonized Commodity Description and Coding System, which is ratified on 10.11.1988

published in Official Gazette and entered into force on 01.01.1989, is a legal basis of Turkish

Customs Tariff. Turkish Tariff Nomanclature (TTN) is published by Undersecretariat for

Customs every year as a Decree and enters into force as of 1st of January.

TTN has four columns including tariff codes, description of the goods, supplementary units and

conventional duty rates. As a result of Customs Union between Turkey and EC; Turkey

eliminated all customs duties applied to imports of industrial products from the EC and started

to apply Community's Common Customs Tariff for imports from the third countries Legislation

applied for Tariff Classification of Goods are listed below;

• HS Nomenclature and Legal Notes

• HS Explanatory Notes • HS Alphabetical Index

• HS Committee Decisions

• HS Classification Opinions

• Turkish Tariff Nomenclature

• Combined Nomenclature

• EC Classification Decisions (27 Regulations)

and references used in tariff classification of goods are;

• CN Explanatory Notes

• EC Classification Decisions

• WCO Commodity Database

• EU Database (EBTI, TARIC, ECICS)

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Binding Tariff Information (BTI)

Binding Tariff Information are issued by Directorate General of Customs, it is binding in Turkey

and valid for 6 years.

Origins of Goods

Customs Law refers to two different kinds of rules of origin; Non-Preferential Rules of Origin

Preferential Rules of Origin According to Article 19 of CL; goods whose production involved

more than one country is deemed to originate in the country where; a new product was

manufactured, or the goods underwent their last, substantial, economically justified processing

and the important stage of manufacture was done.

a- Origin Rule for Textile Products

If the products are not wholly obtained; the rule “working or processing” is applied for textile

products mentioned in Annex 4 of the Implemented Regulation of Customs Law (IRCL).

“Working and processing” is described in column 3 of Annex 4. For the textile products that are

not mentioned in Annex 4 of IRCL, the rule “Change of Tariff Heading (CTH)” is applied.

b- Origin Rule for Other Goods

If the products are not wholly obtained; the rule “working or processing” is applied for products

mentioned in Annex 5 of IRCL and the rule “last substantial processing or working” is applied for

products which are not mentioned in Annex 5 of IRCL.

c- Preferential Rules of Origin

Preferential rules of origin lay down the conditions governing acquisition of origin which goods

must fulfill in order to benefit from the preferential regime (either reciprocal or autonomous) of

Turkey. According to Article 22 of CL, rules of origins; for goods that will be benefited from the

preferential regimes are determined in accordance with agreements, for goods benefited from

preferential tariff measures covered by the autonomous trade arrangements determined in

accordance with the Council of Ministers Decrees (Decree).

d- Preferential Trade Scheme of Turkey Bilateral Trade Arrangements;

• Free Trade Agreements with third countries

• Free Trade Agreement with the EC for the ECSC (European Coal & Steel Community) products

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• Decision No. 1/98 of the EC-Turkey Association Council for agricultural products Autonomous

Trade Arrangement;

• Generalized System of Preferences (GSP)

e- Trade Regime Between Turkey and the EC

f- Trade with Third Parties

Article 16 of EC-Turkey Association Council (Customs Union Decision) states that “Turkey shall

align itself progressively with the preferential customs regime of the Community within five

years as from the date of entry into force of the Decision”.

This alignment concerns both the autonomous regimes and preferential agreements with third

countries. Within the context of Article 16, Turkey has concluded free trade agreements with

countries/groups of countries and autonomously granted preferences for the developing and the

least developed countries in the framework of GSP.

Origin protocols of Free Trade Agreements are based on; Bilateral Cumulation Pan-European

Cumulation (Diagonal) Pan-Euro-Med Cumulation (Diagonal & Full) Turkey has signed

agreements with countries or country groups below;

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g- Proofs of Origin

1. Certificate of Origin

Certificate of origin corresponding with the model of Annex 6 of IRCL is used both for import

and export of the product.

2. EUR.1 and EUR-MED Movement Certificates

Issued by the Chambers of Commerce and Industry and endorsed by the Customs

Authorities on application by the exporter

EUR.1 Movement Certificates for fishery products exported to the EC are issued and

endorsed by the Customs Authorities.

3.Invoice Declaration and Invoice Declaration

EUR-MED Invoice declaration can be made out by any exporter for consignments of a value

less than € 6.000 or can be made out by only “approved exporter” for consignment of a value

higher than € 6.000.

4.Certificates of Origin Form A

Form A is used by the beneficiary countries for preferences granted under the scheme of

GSP.

5.Supplier's Declarations and INF 4 Certificates

Supplier's declaration is used to establish the preferential origin of the goods which are in

free circulation in the Customs Union area between Turkey and the EC. INF 4 certificate is

used for the verification of supplier's declaration

h- Binding Origin Information

Binding Origin Information is issued by Directorate General of Customs. It is issued on

request of the applicant and both for export and import. It valid for 3 year and can be

revoked by customs authority.

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i- Goods Which Shows or Rises A Suspicion That They Are Products of A

Country Other Than Their Producer Countries.

It is not permitted the importation of

Goods having a name or sign, either on themselves or their inner or outer coverings,

which shows or rises a suspicion that they are products of a country other than their

producer countries.

All kinds of blank envelopes, tapes, labels, stamps and likewise goods with prints or

writings in foreign languages on them which shows or rises a suspicion that they are

products of a foreign country into Turkey in order to be used for goods of Turkish origin

and, with the exception of the proforma invoices of foreign firms not established in

Turkey, the importation of blank invoices to Turkey, either signed or not, which may

make documents issued in Turkey seem as issued in other countries.

Such goods of the firms established in Turkey and of the foreign firms which have signed

agreements of license, royalty or patent, are not subjected to above mentioned provisions.

Customs Valuation

Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade that

replaced the GATT Valuation Code and which aims to provide a single and common system for

the valuation of imported goods for customs purposes was accepted in 1988 by Turkey and it

began to be implemented as of 12.2.1994.

Turkey harmonized customs valuation provisions with that of the EC in line with the provisions

of Article 28 of the EC Turkey Association Council Decision No. 1/95. Therefore, provisions

related to customs valuation in CL are in accordance with the relevant provisions of the Council

Regulation No. 2913/92.

1. Customs Valuation Methods

Customs valuation of the imported goods is determined according to the following methods

and these methods are applied in order of their hierarchical sequence;

Transaction value method

Transaction value of the identical goods method

Transaction value of the similar goods method

Deductive method

Computed value method

Fallback method

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2. Simplified Procedures in Customs Valuation

According to the provision of article 31/2 of CL; customs value of perishable goods, may be

determined under simplified procedures at the request of the declarant. Article 45 of IRCL

regulates the implementation of simplified procedures on customs valuation.

According to Article 45, for the perishable goods, it is possible to declare the items which are to

be added to the price actually paid or payable for the determination of the customs value after

importation to Turkey.

Summary Declaration and Unloading of Goods Presented to Customs

According to the provisions of CL, goods presented to customs should be covered by a summary

declaration and the summary declaration must be lodged to the concerned customs

administration within working hours of the first working day following the date on which the

goods are presented to customs.

Where goods are covered by a summary declaration, the formalities necessary for them to be

assigned a customs-approved treatment or use must be carried out within:

45 days from the date on which the summary declaration is lodged in the case of goods

carried by sea;

20 days from the date on which the summary declaration is lodged in the case of goods

carried otherwise than by sea.

Temporary Storage of Goods

Until the goods are assigned a customs-approved treatment or use, they have the status of goods

in temporary storage. Goods in temporary storage can be stored only in places approved by the

customs administrations.

Customs administrations may require the person holding the goods in temporary storage to

provide security with a view to ensuring payment of any customs debt which may arise. Goods

in temporary storage can be subject only to such forms of handling as are designed to ensure

their preservation in an unaltered state without modifying their appearance or technical

characteristics.

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Protection of Intellectual and Industrial Property Rights at Customs

Under the legislation of protection of intellectual and industrial property rights, regarding the

rights of trademarks, geographical indications and industrial designs and the rights covered by

the Law of Intellectual and Artistic Work; at the request of the right holder or his representative

or by their own initiative and where solid evidence is available that goods in question complies

with the description of the counterfeit trademark or pirated copyright goods, customs

administrations may suspend the customs procedures of the goods infringing the rights of the

persons concerned.

If a suspension decision is adopted, the importer or the right holder or his representative is

noticed by custom authority. If the customs administration has not been informed that legal

proceedings leading to a decision on the merits of the case have been initiated or that the duly

empowered judicial authority has taken provisional measures within a period of 10 days

following the notification to the right holder, customs procedures are carried out in accordance

with the request of the declarant.

Placing of Goods Under a Customs Procedure

All goods intended to be placed under a customs procedure should be covered by a declaration for

that customs procedure.

The customs declaration can be made:

in writing; or using a data-processing technique;

or orally;

or by means of any other act whereby the holder of the goods expresses his wish to place them under

a customs procedure.

A declaration that is registered by the customs administration binds the declarant as a commitment,

with regard to the duties and fines to which it refers and it is the base to asses the customs duties.

Simplified Procedures

Simplified procedures system facilitates customs formalities for the firms certified as Customs

Approved Persons (CAP) by the customs authority. It is a layered system and CAPs are classified

according to their export or export-import performance, number of employees they employ etc.

in three groups as;

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A Class Customs Approved Person,

B Class Customs Approved Person,

C Class Customs Approved Person,

Release For Free Circulation Regime

According to the article 74 of the CL, goods that came to the Customs Territory of Turkey

can be released for free circulation, as long as the commercial policy measures are

applied, the other formalities laid down in respect of the importation of goods are

completed and any duties legally due are charged.

Transit Regime

Transit regime is defined in CL as movement of goods in the Customs Territory of Turkey from;

A foreign country to a foreign country

A foreign country to Turkey

Turkey to a foreign country

An inland customs office to another inland customs office

Transit goods can be moved in Customs Territory of Turkey with the documents listed below;

Transit declaration

TIR carnet

ATA carnet

NATO form 302

Post

Summary declaration for goods carried out by sea or air from a Turkish port to another Turkish

port or to a port outside the Customs Territory of Turkey

a- Security in Transit Regime

According to the CL, security for transit should cover the full amount of customs debt (duties and

other charges). There are 3 different types of securities;

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Security for single transit operation Turkish Lira in Cash Letter of guarantee issued by a bank or private financial institutions Treasury bills or bonds Foreign currencies Comprehensive security that covers number of transit operation Global security that covers number of transit operation

Bonded Warehouse Regime

According to the CL, it is possible to store goods not in free circulation in bonded warehouses

without being subject to import duties or commercial policy measures. There is no limit to the

length of time for remaining of goods in bonded warehouses. CL defines two types of bonded

warehouse as; public bonded warehouse and private bonded warehouse; public bonded

warehouses are available for use by any person and public bonded warehouses are reserved for

only the storage of goods by the warehousekeepers.

The fairs and exhibitions where goods not in free circulation are exhibited are deemed as private

warehouses. Import goods may undergo the usual forms of handling for preserving them,

improving their appearance or marketable quality or preparing them for distribution or resale.

The cost of warehousing and of preserving goods while they remain in the warehouse, needs not

be included in the customs value if they are shown separately from the price actually paid or

payable for the goods, however these costs must be added to the tax base of VAT.

Inward Processing Regime

IPR is a system allowing Turkish manufacturers/exporters to obtain raw materials, intermediate

unfinished goods that are used in the production of the exported goods without paying customs

duty and being subject to commercial policy measures. Having granting IPR authorization, the

owner of the IPR authorization is obliged to import goods stated on authorization and export

them after processing the imported goods.

The basic endeavor of the IPR is to maintain materials at the world market prices and enhance

the competitiveness of Turkish exporters. IPR can be implemented in two different ways.

Suspension System: In suspension system; goods not in free circulation, which is intended for re-

export from Turkey in the form of compensating products, can be imported temporarily after

having them covered under a security. When the goods are exported in the form of

compensating products, the security is returned.

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Drawback System: In the case goods released for free circulation are exported from Turkey in

the form of compensating products, the import duties collected while they were released for free

circulation are returned.

Authorization certificate can only be granted to the firms which apply for via internet and can

submit necessary documents to Undersecreteriat for Foreign Trade (UFT) via General

Secretaries of Exporters Associations. Necessary documents are inward processing project form,

table of raw materials, list of authorized signatures, petition, trade registration journal, capacity

report and other technical documents in some special cases.

The firms which have granted an authorization certificate should have to import and export

goods without paying any kind of custom duties and fees within the period stated on the

authorization certificate. This period of discharge cannot be longer than 12 months. However,

for some special production facilities the time can be given up to 24 months. The period of

discharge can be extended maximum half of the period stated on the authorization certificate

due to the force major situations.

Processing Under Customs Control Regime

The procedure for processing under customs control allows goods not in free circulation to be

used in the Customs Territory of Turkey in operations which alter their nature or state, and

without their being subject to import duties or commercial policy measures, and allows the

products resulting from such operations to be released for free circulation at the rate of import

duty appropriate to them.

Authorization for processing under customs control is granted by the customs administrations

at the request of the person who carries out the processing or arranges for it to be carried out.

Temporary Importation Regime

The temporary importation regime is defined in the CL as follows:

“The temporary importation procedure shall allow use in the customs territory of Turkey, with

total or partial relief from import duties and without their being subject to commercial policy

measures, of goods not in free circulation intended for re-export without having undergone any

change except normal depreciation due to the use made of them”.

In accordance with the provisions of the CL governing the temporary importation procedures,

the use of the temporary importation procedure with partial relief from import duties is granted

in respect of goods which, while remaining the property of a person established outside the

customs territory of Turkey, are not covered by the provisions of Council of Minister's Decree

No. 2000/69 or which are covered by such provisions but do not fulfill the conditions provided

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for therein for the grant of temporary importation with total relief provided that the amount of

import duties payable in respect of goods placed under the temporary importation procedures is

set at 3% for every month and the remaining amount is secured.

Authorization for the temporary importation of the property of a person established outside the

customs territory of Turkey, and the goods which are covered under special conditions laid

down in the provisions of Council of Minister's Decree No. 2000/69 which defines “Special

Conditions for the Temporary 21 Importation Procedures with Total Relief from import duties”

and not covered by the provisions of the said Decree or covered by the provisions of the said

Decree but do not fulfill the conditions provided for therein for the grant of temporary

importation with total relief or required to use the temporary importation procedures with

partial relief, is granted by the relevant customs office at the request of the person who uses the

goods or enables for them to be used.

The Outward Processing Regime

The outward processing procedure allows goods in free circulation to be exported temporarily

from Turkey in order to undergo processing operations and the products resulting from those

operations to be released for free circulation with total or partial relief from import duties. The

authorization specifies the period within which the compensating products must be reimported

into Turkey. They may extend that period on submission of a duly substantiated request by the

holder of the authorization.

The import duties is effected by deducting from the amount of the import duties applicable to

the compensating products the amount of the import duties that would be applicable on the

same date to the temporary export goods if they were imported from the country in which they

underwent the last processing operation. The amount to be deducted is calculated on the basis

of the quantity and nature of the goods in question on the date of acceptance of the declaration

placing them under the outward processing procedure and on the basis of the other elements of

charge applicable to them on the date of registration of the declaration relating to the release for

free circulation of the compensating products.

Where the purpose of the processing operation is the repair of the temporary export goods, they

are released for free circulation with total relief from import duties where it is demonstrated

that the goods were repaired free of charge, either because of a contractual or statutory

obligation arising from a guarantee or because of a manufacturing defect. However, this

provision does not apply where account was taken of the defect at the time when the goods in

question were first released for free circulation.

Outward Processing with Use of the Standard Exchange System:

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The standard exchange system permits an imported product (replacement product) to replace a

compensating product. The customs administrations allow the standard exchange system to be

used where the processing operation involves the repair of goods in free circulation other than

those subject to the agricultural policy or to the specific arrangements applicable to certain

goods resulting from the processing of agricultural products.

If a security is provided to cover the amount of import duties, replacement products may be

permitted to be imported before the temporary export goods are exported. Replacement

products must have the same tariff classification, be of the same commercial quality and possess

the same technical characteristics as the temporary export goods had the latter undergone the

repair in question.

Where the temporary export goods have been used before export, the replacement products

must also have been used products. However derogation may be granted if the replacement

product has been supplied free of charge either because of a contractual or statutory obligation

arising from a guarantee or because of a manufacturing defect.

Export Procedure

According to the CL, export goods is deemed they were actually exported on condition that they

were removed from the customs control and leave the Customs Territory of Turkey in the same

state when the export declaration was registered. In this case the customs control on the export

goods ceases.

Re-exportation, Destruction and Abandonment

Related provisions of CL allow to goods not in free circulation re-exported from the Customs

Territory of Turkey. CL is also allows destruction or abandonment of goods not in free

circulation, however only under the supervision of the customs administrations and with no

expense for the Exchequer.

Returned Goods

Goods in free circulation which, having been exported from Turkey are returned to Turkey and

released for free circulation within a period of three years is, at the request of the person

concerned, granted relief from imported duties However, above mentioned relief from import

duties is not granted for goods which have benefited from the foreign trade measure in its

exportation.

Security

If the customs administrations require security to be provided in order to ensure payment of a

customs debt, such security can be provided by the person who is liable or who may become

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liable for that debt. Customs administrations may also allow security to be provided by a person

other than the person from whom it is required.

The security is not released until the customs debt is extinguished. Once the customs debt has

been extinguished in part, part of the security can be released at the request of the person

concerned,

Repayment and Remission of Duties

Customs duties are repaid in so far as it is established that when they were paid the amount of

such duties was not legally owed. Customs duties shall be remitted in so far as it is established

that when they were illegally assessed.

However; no repayment or remission is granted when the facts which led to the payment or

entry in the accounts of an amount which was not legally owed are the result of deliberate action

by the person concerned.

Customs duties shall be repaid or remitted on submission of an application to the appropriate

customs office within a period of three years from the date on which the amount of those duties

was communicated to the debtor. Customs duties paid on the basis of a declaration are repaid on

request of the person concerned by invalidating the customs declaration.

As of the registration date of the declaration, import duties is repaid or remitted insofar as it is

established that the amount of such duties entered in the accounts relates to goods placed

rejected by the importer because they are defective or do not comply with the terms of the

contract on the basis of which they were imported.

Goods damaged before their release are also accepted as defective. Repayment or remission of

import duties is granted on condition that the goods have not been used, except for such initial

use as may have been necessary to establish that they were defective or did not comply with the

terms of the contract; the goods are exported from the Turkey.

The customs administrations may permit the goods to be destroyed or to be placed, for the

purposes of their re-exportation, under the transit procedure or the customs warehousing

procedure or in a free zone, instead of being exported. For the purposes of being assigned one of

the customs-approved treatments or uses provided for in the preceding subparagraph, the

goods shall be deemed to be the goods not in free circulation.

Customs duties may be repaid or remitted in situations other than those referred above under

conditions to be laid down by the Council of Ministers within the framework of the provisions of

international agreements to which Turkey is a party.

Penalties

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There are 2 types of penalties have been defined in CL;

Penalties to be charged on operations that result in tax loss

Fines relating to irregularities It is not important for the application of fine whether the act which

entails a fine is deliberate or not.

a- Penalties To Be Charged On Operations That Result In Tax Loss

As a result of any declaration, examination and control or release relating to goods subject to

free circulation procedure or temporary relief arrangement;

(a)Apart from the existing duties, a threefold of these duties and shall be charged as fine in the

case that any discrepancy occurs in the nature and characteristics of goods affecting the tariff

treatment or in such measurements of goods as number and weight which are subject to

taxation; and provided that the difference between the duties calculated pursuant to declaration,

and the duties to be charged in accordance with the examination results, exceeds 5%.

(b) Apart from the customs duties regarding the deficit, a threefold of these duties shall be

charged as fine in the case that the examinations and controls have demonstrated that the

declared value of the goods subject to ad-valorem duties is deficient when compared with the

value determined according to related provisions of CL.

In case of a difference less than 5% and in the deficient value declarations incurred from a

formal account error, the customs duty regarding these differences as well as a fine at an amount

of one fold of this duty, shall be charged.

Although guarantee has been provided, if the goods wholly or partly removed from warehouses

or designated places by the customs administration, without commencing the customs

formalities or without the authorization of the customs administration after completing them,

threefold of these duties shall be charged as fine as well as export or import duties of the

removed goods.

Violation from the provisions regarding the Inward Processing Procedure and the Temporary

Importation Procedure; requires the collection of the duties relating to goods. In addition, a fine

at the rate of two fold of this duty is charged.

b- Fines Relating to Irregularities

Without prejudice to the circumstances for which a separate penalty has been assigned, an

irregularity fine (172 YTL for 2006) is charged on those who have violated the formats and

procedures laid down by the by-laws, regulations, notifications and instructions issued on the

basis of CL and the authorities granted therein.

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For Example;

Irregularity fine is applied two fold if declerants fails to present, within the prescribed time, the

summary declaration or the commercial or official document used as summary declaration.

Irregularity fine is applied four fold if the goods in warehouses are underwent handling without

authorization of the customs administrations.

Appeals

Within 15 days from the notification of the customs duties, the debtors may apply to the customs

administration with a petition concerning the correction. The relevant customs administration

decides on the request for the correction within 30 days, and notifies the debtor hereof. It is

possible to appeal against the decisions regarding the requests for correction, administrative

decisions, customs duties and penalties within 7 days to the Regional Directorate for Customs to

which the decision making customs administration is affiliated.

Where the first decision has been taken in the regional directorate of customs, it can be appealed

against that decision to the Undersecretariat for Customs within 15 days.

Any person has the right to appeal judiciary bodies where the Directorate for Customs or

Regional Directorate for Customs are located in which the formalities relating to the decisions of

the Regional Directorates for Customs and Undersecretariat for Customs are carried out.

2.8. Opportunities/Challenges

Challenges

The Republic of Turkey is a complex and challenging market requiring adaptability and

persistence. Exporters face many of the same challenges that exist in other semi-developed

countries, such as contradictory policies, regulations and documentation requirements, lack of

transparency in tenders and other procurement decisions, and a time consuming, unpredictable

judiciary and legal and regulatory framework. Careful planning and patience are the keys to

success in Turkey.

Because of the Customs Union with the EU, UK companies don’t experience the same obstacles

they may face in other high growth markets. However, there are certain unique challenges when

doing business in or with Turkey. These include:

Regulatory issues

Bureaucracy

Sudden changes to legislation and regulations without warning and consultation

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A need to demonstrate a commitment to the market, either by having a visible presence in

the country or building and maintaining strong relationships

Necessity of regular market visits to fulfil turkish requirements

Opportunities

 

The Republic of Turkey’s slow but continued movement toward membership in the European

Union has created momentum to adopt European business regulations and standards in Turkey,

thereby ultimately making it easier to sell and conduct business in this market. Similarly,

reforms since 2001 have created a stronger and more stable economy that has attracted foreign

investment, which in turn has been followed by needed capital improvements and demand for

new products and services.

Turkey is;

Gateway to the markets of Central Asia, south Caucasus and the Middle East

European business ethics and modern management practices

Increasing use of English for business

A 6 day average to start a business

Low social security contribution rate with an offer of a 5% rebate

New initiatives to meet EU standards making it a more familiar business environment

Strengths of the Turkish market include:

Becoming the world’s 16th largest economy and Europe’s sixth

A forecast to be in the world’s top 10 economies by 2023

Strong Gross Domestic Product (GDP) growth with an average of 5% between 2002 and

2012

Having the youngest and fastest growing population in Europe (700,000 graduates per

year)

Istanbul and Ankara being among the biggest cities in the world in terms of GDP

A forecast to be the second fastest growing country in the world by 2018 according to the

Organisation for Economic Co-operation and Development (OECD)

İnvestments of more than TL 112 billion (USD 60 billion) in the transport, maritime and

communications sectors in the last 9 years

Access to markets valued at USD 25 trillion GDP and 1.5 billion customers in Europe,

Eurasia, the Middle East and North Africa within 4 hours flight

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3. MAIN INDUSTRY REPORTS

Economic growth has picked up in recent years, but the income gap with other OECD countries

remains large. As a catching-up and open economy, Turkey’s main economic sectors –

agriculture, textiles and clothing, machinery, steel, lumber, paper, and transport equipment – are

under pressure from lower-wage competitors vying for market share. Raising productivity and

innovation in these sectors will be crucial for maintaining competitiveness and attracting the

foreign direct investment (FDI) needed to continue the modernisation process.

1. Agriculture and Food 

With its favorable geographical conditions and climate, Turkey is considered to be one of the

leading countries in the world in the field of food and agriculture. The restructuring efforts that

began in the early 1980s, alongside a series of reforms including privatizations and the

reduction of trade barriers in the agriculture sector, resulted in a domestic market that is an

integral part of the world economy today.

Turkey has a large and growing food and agriculture industry that corresponds to 9 percent of

the overall gross value-added (GVA) and a quarter of the employment levels in the country.

The strengths of the industry include the size of the market in relation to the country’s young

population, a dynamic private sector economy, substantial tourism income and a favorable

climate. Turkey has a population of 76 million people and is growing with rising income levels.

This makes Turkey one of the largest markets in its region, and the changing consumer habits of

the younger generation boost domestic consumption.

 

Consequently, Turkey’s food industry has registered steady growth in recent years, with Turkish

consumers becoming increasingly demanding, driven by the multitude of choices offered by

mass grocery retail outlets. Rising disposable income and changing consumption patterns, along

with the increase in the number of females in full-time employment, have all led to an increase of

interest in packaged and processed food, such as ready-to-eat meals and frozen food.

Turkey is the world leader in the production of dried figs, hazelnuts, sultanas/raisins and dried

apricots. It has the largest milk and dairy production in its region. In addition, Turkey has an

estimated total of 11,000 plant species, whereas the total number of species in Europe is 11,500.

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While Turkey is becoming one of the largest markets for baked goods with its bread - an

important element of the Turkish diet - subsector dairy products including milk, yoghurt, cheese,

kefir and ayran (a drink made of yoghurt and water) form an integral part of the traditional

Turkish diet. Traditionally, artisan, unpackaged products have dominated the Turkish dairy

market, holding back widespread growth but also offering potential to investors.

This potential positions Turkey to be among the top options for being the regional headquarters

and supply center of top global players. In its region, Turkey has a strong dominance in

production and exportation of many agricultural products such as hazelnuts, dried apricots,

sultanas and dried figs. In addition, Turkey’s food industry is much better developed than that of

neighboring countries. Given these factors, the country is one of the largest exporters of

agricultural products in the Eastern Europe, Middle East and North Africa (EMEA) region, while

its trade balance is significantly positive. With growing exports, the Turkish agrofood industry

has recorded USD 5.6 billion of trade surplus in 2014.

Turkey offers a set of enablers for potential agrofood investors; the Turkish government’s

support mechanism includes favorable regulations, tax structure, competitive labor force and

investment incentives.

According to McKinsey and Co., Turkey offers significant investment opportunities especially in

the agribusiness subsectors such as fruit and vegetable processing, animal feed, livestock,

poultry, dairy and functional food, aquaculture, and enablers (in particular cold chain,

greenhouse, irrigation, and fertilizer).

As part of its targets set for the agriculture sector, by 2023 Turkey aims to be among the top five

producers globally. Turkey’s ambitious vision for 2023 envisages other grandiose targets

including:

 

USD 150 billion gross agricultural domestic product

USD 40 billion agricultural export

Becoming one of the top five countries in terms of agricultural production

8.5 million hectare irrigable area (from 5.4 million)

Ranking number one in fisheries as compared with the EU

2. Automotive

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The foundations of Turkey’s automotive industry date back to the early 1960s, when the first

efforts to develop and produce the first Turkish-made passenger car were undertaken. During a

period of rapid industrialization and progress, this key sector transformed itself from assembly-

based partnerships to a full-fledged industry with design capability and massive production

capacity. Between 2000 and 2014, original equipment manufacturers (OEM) invested more than

USD 12 billion in their operations in Turkey. These investments significantly developed their

manufacturing capabilities, which has led to Turkey becoming an important part of the global

value chain of international OEMs. Meeting and exceeding international quality and safety

standards, today’s Turkish automotive industry is highly efficient and competitive thanks to

value-added production. Turkey accounts for 25 percent of the automotive production occurring

in Central and Eastern Europe.

The automotive industry is a main driver of the manufacturing sector in Turkey. It is one of the

largest employers in the country, creating job opportunities for more than 400,000 people. With

three out of the five top exporters hailing from the automotive industry, it is also an export

champion with its 16 percent share in total exports.

 

In 2011, the Turkish government released an official automotive sector strategy in a bid to shape

the future of the industry. This strategy has as its primary objective the “enhancement of

sustainable global competitive strength of the automotive sector and its transformation into an

industry that utilizes advanced technology and generates high value-added.” The key elements

of this official strategy include the production of a locally designed and manufactured car,

research into which is already underway. Turkey is set to become one of the few countries with

its own automobile brand in the coming years.

 

To this end, activities aimed at improving the R&D, design and branding capabilities will play a

vital role in reaching the higher end of the value chain. As such, Turkey’s automotive industry is

increasingly investing in R&D efforts. As of the end of 2014, 50 R&D centers belonging to

automotive manufacturers/suppliers are operational in Turkey. This accounts for the largest

group of R&D facilities in any industry in the country.

 

The total amount spent on R&D activities in Turkey has also been increasing steadily, with R&D

expenditures reaching TRY 14.8 billion in 2013, up from 2001’s level of TRY 1.29 billion -- an

impressive compound annual growth rate (CAGR) of 22.5 percent. The R&D spending in

Turkey’s automotive industry rose from TRY 206 million in 2006 to TRY 547 million in 2013.

Notable examples of global brands conducting product development, design and engineering in

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Turkey include Ford, Fiat and Daimler. Ford Otosan’s R&D center is one of Ford’s three largest

global R&D centers, while Fiat’s R&D center in Bursa is the Italian company’s only center serving

the European market outside its home country. Meanwhile, Daimler’s R&D center in Istanbul

complements the German company’s truck and bus manufacturing operations in Turkey.

 

Turkey also offers a supportive environment on the supply chain side. There are around 1,100

first-tier companies working directly with OEMs. With the parts going directly to the production

lines of vehicle manufacturers, the localization rate of OEMs varies between 50 and 70 percent.

Turkey is also home to many global suppliers. There are more than 250 global suppliers that use

Turkey as a production base, with 28 of them ranking among the 50 largest global suppliers.

 

The product portfolio of automotive manufacturers in Turkey covers a wide range of vehicles

from sedans to heavy trucks. Taking advantage of its competitive and highly-skilled workforce,

dynamic local market and favorable geographical location, Turkey increased its vehicle

production from 374,000 in 2002 to over 1,170,445 units in 2014, representing a CAGR of

around 10 percent during this period.

 

This growth has led Turkey to become the 17th largest automotive manufacturer in the world.

Turkey has already become a center of excellence, particularly with respect to the production of

commercial vehicles. By the end of 2014, Turkey was the largest producer of light commercial

vehicles in Europe.

 

Auto manufacturers increasingly choose Turkey as a production base for their export sales. This

is evidenced by the fact that around 75 percent of production in Turkey is destined for foreign

markets. In 2014, close to 900,000 vehicles were exported from Turkey to different markets.

While Germany, France, Italy, UK and Spain are currently the major export customers of the

Turkish automotive industry, there is a trend of diversification in export destinations with

companies looking into nearby emerging countries where there is considerably more demand

potential for new auto sales.

 

Turkey’s strength in the auto industry has been built on its robust domestic demand, which has

driven investment in the industry by major international auto manufacturers. Backed by the

country’s strong economic performance, auto sales have shown remarkable growth in recent

years. Between 2003 and 2014, the Turkish automotive market saw a CAGR of 9.30 percent.

 

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In 2013, domestic vehicle sales reached just shy of 800,000 units. Despite strong sales figures,

automobile penetration in Turkey -- 165 cars per 1,000 people -- is still well behind the

European average of 500. This indicates ample opportunities for carmakers in the domestic

market. Increased purchasing power combined with a low automobile ownership rate should

help drive automobile sales in the coming years.

3. Business Services

Turkey’s strategic location at the crossroads of Europe, the CIS, the Middle East, and Asia, has

helped propel the country’s economy into the upper echelon over the past decade. Turkey’s

2014 GDP of approximately USD 820 billion is good enough to rank the country as the 17th

largest economy in the world and the 6th largest economy in Europe. Turkey has easy access to

1.6 billion consumers, a combined GDP of USD 27 trillion, and a trade volume of USD 8 trillion

within a four-hour flight radius. Turkey is also a major energy corridor, serving as a hub

connecting Europe, Central Asia, and the Middle East. This favorable position, along with the

country’s existing potential, population growth, and increase in income per capita have

positively impacted the development of the business services sector in Turkey.

 

Turkey has significant experience in a wide range of business service lines, such as engineering

services and contracting, testing and technical analysis, call centers, auditing and accounting, law

advisory services, healthcare, transport, retail, as well as consulting and financial services.

 

As the private sector increasingly focuses on customer services, Turkey’s call center and

business process outsourcing (BPO) sector has achieved considerable growth in recent years. In

addition to thousands of business centers with services for telecom operators, airlines and

financial institutions, the sector is set for further growth owing to demand drivers such as a

young and skilled work force, strategic geographic position, and government incentives aiming

to increase growth in underdeveloped regions. The list of major companies with BPO units in

Turkey includes Vodafone, Lufthansa, ING Bank and DHL.

 

The call center sector in Turkey has gained momentum since the inception of the first call

centers in the 1990s. Employment in the industry has grown at an annual rate of 20 percent

since 2010, when the sector was comprised of 1,000 companies, 40,000 employees, and had a

value of USD 400 million. According to the Turkish Call Centers Association, the industry was

worth USD 1.6 billion and employed 80,000 people in 2014, up from the 2013 figures of USD 1.4

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billion and 70,200 respectively. The call center sector has set an ambitious target of having a

work force of 350,000 people by 2023.

 

Meanwhile, legal advisory services, consulting, and financial services also play a crucial role in

Turkey’s economy. Turkey’s vibrant economy and improved business environment have

resulted in the growth of consulting services in Turkey. Major global companies in these sectors

now have their offices in Turkey. According to Euromonitor International, turnover of the legal

advisory services sector will reach USD 3 billion by 2017, whereas turnover in consulting will

reach USD 19 billion. In addition, as new regulations come into force and Turkey aspires to have

compatible standards with the EU, the auditing and accounting sector will continue to grow.

 

With its existing potential and ambitious targets for 2023, Turkey offers great opportunities for

investors. The country’s growing commercial and industrial output attracts an increasing

number of enterprises, particularly in the business services sector.

4. Chemicals

The chemicals industry has a unique position in the manufacturing sector as it not only produces

end-products such as plastics, cosmetics, and pharmaceuticals, but also supplies intermediate

products for countless other industries.

With robust market growth fueled by downstream industries, Turkey is an attractive investment

location for chemical companies. The sustainability of growth in customer industries in Turkey

is unquestionably a source of strength. The following factors also make Turkey an attractive

investment destination:

 

Advanced transportation infrastructure provides flexibility, convenience and additional

cost savings for manufacturers.

Turkey's plastics sector is the 2nd largest producer in Europe and 7th largest in the

world; Turkey aims to become the top producer in Europe by 2016.

Turkey is the 2nd largest net importer of petrochemicals in the world.

Turkey is the 17th largest automotive producer in the world.

In the construction sector, 42 of the top 250 international contractors are Turkish.

Turkey is the 4th largest paint producer in Europe.

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As a strong manufacturing and conversion hub, Turkey is one of the largest European

consumers for textile and construction chemicals.

Turkey has the 7th largest agricultural production in the world, while its demand for

fertilizer is the 10th highest in the world.

Turkey is located close to large and growing trade markets.

 

Over the coming years, Turkey's chemical industry is poised for extraordinary growth with

exports projected to reach USD 50 billion by 2023.

 

Turkey has six strategic goals as part of the government’s Vision 2023. These include

manufacturing high value-added products, transforming facilities to enable high value-added

production, structuring R&D policies, educating a high-skilled work force, developing and

ensuring an environment of cooperation, and increasing demand for locally manufactured

products.

5. Electronics

The electronics industry in Turkey has been growing steadily over the last few years. In 2013,

production in the sector increased by 5.1 percent, reaching USD 13.1 billion, while exports hit

USD 6.5 billion. Meanwhile, imports reached USD 17.3 billion during the same year.

 

The sector provides jobs for 50,000 people in production and 100,000 people in related

engineering end services. Representing 2 percent of the total GDP, the Turkish electronics sector

offers huge potential for investors.

 

Competitive incentives, along with Turkey's strategic location as a hub connecting Europe and

the MENA region, make the country attractive for both production and management operations.

Many multinational companies, including Microsoft, Intel and General Electric, have either

established their manufacturing bases in or moved their headquarters to Turkey, as the country

offers a robust platform for economic expansion on a regional scale.

 

The motivation among Turkey’s young population to work in the electronics sector provides a

high-quality work force for investors. In recent years, both the number of university students

pursuing relevant studies and the number of open job opportunities in the electronics sector

have been rising continuously.

 

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In the Turkish electronics market, consumer electronics accounted for the largest share in

production with 27 percent in 2013, reaching USD 3.5 billion, followed by telecommunications

equipment with 20 percent, other professional equipment with 18 percent, computer

equipment with 17 percent, defense electronics with 12 percent, and components with 6

percent.

As the second biggest sub-sector in production, telecommunications equipment grew by 1.3

percent in 2013, reaching USD 2.6 billion. Even though telecommunication equipment

accounted for the lion’s share in overall electronic exports with USD 2.78 billion, its growth

rate corresponded to 5.6 percent, lagging behind growth in consumer electronics exports.

Turkey attaches great importance to research and development centers, along with clusters.

Currently, there are a total of 35 R&D centers related to the electronics sector and 16 clusters,

which bring together the industry and academia for innovative technology development

projects.

 

The ongoing growth in the electronics industry allows Turkey to channel strong FDI inflow to

the country. Turkey’s electronics sector received approximately USD 3 billion of FDI in past eight

years.

6. Energy and Renewables 

Turkey has become one of the fastest growing energy markets in the world, paralleling its

economic growth over the last ten years. Following the successfully implemented privatization

program in the said period – power distribution is now completely in private sector hands, while

the privatization of power generation assets is set to be completed within the next few years –

has given the country’s energy sector a highly competitive structure and new horizons for

growth.

 

Economic expansion, rising per capita income, positive demographic trends and the rapid pace

of urbanization have been the main drivers of energy demand, which is estimated to increase by

around 6 percent per annum until 2023. The current 70 GW installed electricity capacity is

expected to reach 120 GW by 2023 to satisfy the increasing demand in the country, with further

investments to be commissioned by the private sector. As part of its efforts to offer sustainable

and reliable energy to consumers, Turkey offers investors favorable incentives, such as feed-in-

tariffs, purchase guarantees, connection priorities, license exemptions, etc., depending on the

type and capacity of the energy generation facility.

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 In the last decade, the Turkish government has made significant reforms in the provision of

energy, moving forward the participation of private entities, and thus creating a more

competitive energy market. The privatization of energy generation assets, coupled with a

strategy to clear the way for more private investments, has resulted in an increased share of

private entities in the electricity generation sector, from 32 percent in 2002 to 75 percent in

2015. Another step taken by the Turkish government towards a more competitive energy sector

is the establishment of an energy stock exchange. Once operational, the exchange will not only

enhance the liberalization of the market, but will also ensure transparency and help maintain a

healthy balance between supply and demand.

 

In addition to having a huge domestic market, Turkey is in a strategic location between a

number of major energy consumers and suppliers, and so serves as a regional energy hub. The

existing and planned oil/gas pipelines, the critical Turkish straits and promising finds of

hydrocarbon reserves within the country itself give Turkey increased leverage over energy

prices and reinforce its gateway status.

 

Opportunities for renewable forms of energy production – hydro, wind, solar, geothermal and

others – are abundant in Turkey, and encouraging policies backed by favorable feed-in tariffs are

expected to increase their share in the national grid in the coming years. The Turkish

government has made it a priority to increase the share of renewable sources in the country’s

total installed power to a remarkable 30 percent by 2023, while taking on board the energy

efficiency concept by enacting laws that set principles for saving energy, at both individual and

corporate levels, as well as by providing incentives to energy efficiency investments.

 

As important as the renewables are for Turkey’s energy strategy in the coming years,

technologies in such fields as waste processing and greenhouse gas reduction are also often

cited together with this new form of power generation as critically important supplementary

practices. Sustaining the environment by resorting to renewable resources is accompanied by a

number of measures and regulations that are either currently in effect, or will soon be in effect,

including lowering carbon emissions, increasing generation/transmission efficiency and

promoting the use of waste management technologies.

 

The sum of these factors has had a profound effect on Turkey’s energy sector, and turned it into

one of the most attractive investment destinations in the world. In line with the implementation

of investor-friendly regulations and the high increase in demand, the Turkish energy sector is

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becoming more vibrant and competitive, attracting the attention of more investors for each

component of the value chain in all energy sub-sectors.

 

The total investments required to meet Turkey’s expected energy demand in 2023 is estimated

to be around USD 110 billion, more than double the total amount invested in the last decade.

 

Turkey’s ambitious vision for 2023, the centennial foundation of the Republic, envisages

grandiose targets for the energy sector in Turkey. These targets include:

 

Raising the total installed power capacity to 120 GW

Increasing the share of renewables to 30 percent

Maximizing the use of hydropower

Increasing the installed capacity based on wind power to 20,000 MW

Installing power plants that will provide 600 MW of geothermal and 5,000 MW of solar

energy

Extending the length of transmission lines to 60,717 km

Reaching a power distribution unit capacity of 158,460 MVA

Extending the use of smart grids

Raising the natural gas storage capacity to 5 billion m3

Establishing an energy stock exchange

Commissioning nuclear power plants (two operational nuclear power plants, with a

third under construction)

Increasing the coal-fired installed capacity from the current level of 14.5 GW to 30 GW

7. Financial Services

The Turkish financial sector proved resilient during the global financial turmoil in 2009 as well

as the ensuing economic crisis thanks to the regulatory reforms and structural overhaul that the

government implemented in the wake of the country’s own financial meltdown in the early

2000’s. In fact, the reforms in the sector boosted investor confidence so much that financial

services has become the preferred sector for FDI, attracting over USD 45 billion during the past

decade.

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Banking dominates the Turkish financial sector, accounting for around 60 percent of overall

financial services, while insurance services and other financial activities also show significant

growth potential. Turkey’s banking sector is comprised of 34 deposit banks, 13 development

and investment banks, and 5 participation banks, with 21 of them holding significant foreign

capital.

 

An expanding loan base and favorable liquidity conditions contribute to the healthy growth of

Turkey’s financial services. The sector enjoys a leading position in the world with an ever-

growing asset size and strong equity structure protecting it against shocks that may arise from

loans or turbulent market conditions.

 

The sector overall exhibited a robust 19 percent compound annual growth rate (CAGR) between

the years 2008 and 2014, reaching a total asset size of USD 1.4 trillion. The banking sector in

particular almost doubled its assets during this period, with USD 860 billion on the books by the

end of 2014.

8. Healthcare and Pharmaceuticals 

Turkey’s pharmaceutical market became the 6th largest in Europe and the 16th largest in the

world in terms of sales in 2012. In 2014, pharmaceutical sales saw a 37 percent increase

compared to USD 6.2 billion in 2004, reaching a stunning USD 8.6 billion.

 

Domestic and international investors are ramping up their investments in the pharmaceutical

sector to take advantage of Turkey’s attractive market, where the healthcare and the

pharmaceutical sector grew by 5.8 percent and 8.9 percent respectively from 2012 to 2013.

Expenditures on pharmaceuticals are expected to reach to TRY 20.66 billion in 2015, a 10.3

percent increase on the TRY 18.72 billion figure of 2014. Expenditures on healthcare,

meanwhile, are expected to increase by 10.4 percent from TRY 96.01 billion in 2014 to TRY

105.98 billion in 2015, while the growth in real GDP is projected to be 3.5 percent for the same

period.

 

Turkey has one of the largest and youngest labor pools in Europe, with more than 42 percent of

the population aged between 24 and 54, and the strength of Turkey’s labor force is reflected in

the pharmaceutical sector. In the 2011-2012 academic year, more than 41,000 students

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graduated from vocational training schools and universities in fields related to the

pharmaceutical sector.

 

The Turkish healthcare system has undergone the largest transition in its history over the last

decade. The successes of health reforms, specifically the Health Transformation Program (HTP),

have brought about a marked improvement in the healthcare system and have enhanced access

to healthcare facilities.

 

The Universal Health Insurance (UHI) program was put in place to provide healthcare to every

Turkish citizen; and as a result, the Social Security Institution (SGK) has become the number one

buyer on the purchasing side of healthcare services.

 

A rapidly growing young population is one of the key factors driving demand for healthcare.

Over the next two decades, as the current young population of Turkey ages, there is likely to be a

sharp rise in healthcare demand as almost 80 percent of a person’s healthcare requirements

typically occur after the age of 40-50.

 

Turkey will experience continued economic expansion and rising incomes which, in turn, will

create more demand for health services and products, and these increases are reflected in the

healthcare spending projections. According to Economist Intelligence Unit (EIU) forecasts, the

healthcare sector in Turkey is set to boom by a CAGR of 5.6 percent between 2013 and 2017,

while most developed countries will be experiencing relatively lower growth rates. Turkey is

also expected to surpass the forecasted world average with this growth rate.

 

The social security system now covers approximately 82 percent of the total population, with

62.8 million people now covered. Investments in the healthcare sector are expected to continue

as the government strives to increase the number of hospital beds per 10,000 population to 32

in 2023, up from the current figure of 27.2. The Turkish government has also taken on an

ambitious healthcare PPP program.

 

The Ministry of Health is planning to open health "free zones", which will include hospitals,

rehabilitation centers, thermal tourism facilities, nursing houses, health techno-cities and R&D

centers, to be built in big cities where transportation will be relatively easy.

 

According to PPP professionals, Turkey is the second most attractive market globally for PPP

projects in the medium to long term, and official targets related to the adoption and

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development of e-health systems present significant investment opportunities for ICT

infrastructure companies.

 

Turkey's healthcare expenditure will continue to grow over the long term due to underlying

fundamentals driving demand for healthcare services, its population dynamics, increasing urban

migration and the burden of disease in the country. Furthermore, significant private sector

investments in healthcare facilities will see the country rise in importance as a medical tourism

hub.

 

There are plans to increase health tourism revenues to USD 20 billion by 2023, and as a result,

healthcare spending per capita has been targeted to almost triple by 2023, reaching USD 2,000.

9. ICT

The Information and communication technologies (ICT) sector has become an essential part of

the economy, in particular social life, since it is directly or indirectly affecting the ever-changing

business world.

Turkey is well aware of the fact that this sector will have a much more influential role in the

future than it currently has. Searches for solutions brought about by this development and

growth, which are appropriate for the requirements of today, and the efforts to enable today’s

economic and social life to acquire these most up-to-date and fast solutions instantly, together

form the basis of information and communication technology, since these solution searches

basically require the utmost efficient utilization of both time and physical resources. In this

regard, Turkey has increased its interest in the ICT sector further, and started the necessary

studies so as to have a voice in the sector in the future.

The greatest indicators of these efforts are the new initiatives and R&D Law issued for the

investors.

 

As the young population increases and online market expands, the total number of

mobile phone subscribers is expected to reach 75 million by 2017.

IT spending on hardware, software, IT services and telecommunication services in

Turkey is expected to increase to USD 25 billion by 2016.

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ICT spending in Turkey is expected to grow faster than the world average. With regard to

its large domestic market with sizeable potential in the ICT sector, sector growth is

expected with a CAGR of 7.4 percent during the 2012-2017 period.

More than half of all households in Turkey have computers with internet access, which is

expected to rise to 65.6 percent over the next five years.

The percentage of internet users in Turkey is around 42 percent and this is forecast to

rise to above 47 percent in 2017.

 

Turkey’s ambitious vision of 2023, the centennial foundation of the republic envisages grandiose

targets for the ICT sector in Turkey. These targets include:

 

Reaching 30 million broadband subscribers

Providing internet connection for 14 million houses at a speed of 1,000 Mbps

Increasing the sector's share in GDP from 2.9 percent to 8 percent

Becoming one of the top 10 countries in e-transformation

Having 80 percent of the population computer literate

Increasing the number of companies to 5,500; employees to 65,000; and exports to USD

10 billion in TDZs

Increasing the ICT sector’s size to USD 160 billion, with a market growth of a around 15

percent each year

Increasing the R&D expenditure to GDP ratio to 3 percent from 0.85 percent

10. Infrastructure

Turkey has undergone a profound economic transformation over the last decade and its

economic fundamentals are quite solid. Currently it is the 17th largest economy in the world and

the 6th largest economy in Europe with a GDP of approximately USD 800 billion in 2014.

 

Turkey’s emerging economy presents a need for infrastructure investments in various sectors.

The main industries include, but are not limited to, construction, residential and non-residential

buildings, transportation and energy.

 

Regarding the infrastructure sector, the government allocated USD 26 billion in 2013. 30 percent

of this budget is for the transportation sector, followed by education, energy, healthcare, and

agriculture. Some of the major targets are as following:

 

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Having an export volume of USD 500 billion and being one of the top ten economies in

the world

Increasing the length of high-speed railway lines to 10,000 km from 888 km with a 25

percent CAGR

Achieving 8,000 km of motorways, from 2,155 km, during 2015

Increasing the passenger capacity of airports from 165 million to 400 million by 2023

Accomplishing a 32 million TEU handling capacity for container transport

Having a 10 million DWT shipbuilding capacity

Increasing the number of marinas to 100 with a yacht capacity of 50,000

 

As regards the energy sector, Turkey aims to increase its installed power capacity to 100,000

MW by 2023, up from 71,430 MW in 2015. The aforementioned targets in the energy sector

require significant infrastructure investments in Turkey and offer ample opportunities for

investors.

 

New plans and targets also continue for urban renewal projects. Since the enactment of the

Urban Transformation Law No. 6306, the Turkish government has decided to retrofit and

renovate buildings that are vulnerable to damage from natural disasters, which includes 6.5

million residences, with a budget of USD 400 billion.

 

For detailed information about Turkey’s mega projects:

www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/

InfrastructureAndLogistics.aspx

11. Machinery

The machinery industry in Turkey has been growing at a rate of nearly 20 percent per year since

1990, and 30 percent per year since 2009. The growth of the Turkish machinery sector is backed

by highly competitive and adaptable small and medium-sized businesses (SMEs), which form the

bulk of the industrial production in the country and account for 50 percent of machinery

production.

 

As the drivers of growth in machinery and major contributors to the industrialization of the

country, Turkish SMEs distinguish themselves from their peers in other countries by their

utilization of the competitive and highly-skilled work force Turkey offers. With domestic inputs

accounting for approximately 85 percent of all inputs at the production stage, and over 450,000

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engineering graduates every year, the sector is dynamic and flexible.

 

The combined advantage of the engineering capability required to compete in the international

market with reasonable labor costs enable the Turkish machinery industry to offer a range of

products and components that are both high-quality and affordable. This is evident in the fact

that R&D spending on machinery manufacturing has increased 33 percent between 2010-2012,

outpacing the R&D spending on manufacturing in general (24 percent) and on overall activities

(19 percent) in Turkey. R&D spending on machinery manufacturing (instruments and

equipment) has reached TRY 1.43 billion in 2013, making up almost 10 percent of the total R&D

expenditure.

 

The machinery production of Turkey has also started to take up an increasing portion of the

country’s exports, and accounted for 14.7 percent of total exports to 200 countries with USD

23.3 billion in 2014. The major export destinations of Turkish machinery products include

Germany, UK, Iraq and France. Meanwhile, Turkey imports machinery products mostly from

China, Germany, Italy, South Korea and France. Despite robust domestic production of

machinery, the imports of machinery with USD 46 billion in 2014 are twice that of exports and

19 percent of overall imports, indicating the increasing domestic demand for machinery.

 

The Turkish machinery sector therefore presents strong opportunities for investors with

competitive input costs in labor, energy and logistics, and strong enablers including R&D

readiness, skilled labor, IP protection, targeted incentive programs and an extensive supply

basis with several regional clusters.

Turkey’s machinery industry has been given ambitious export targets for the country’s 100th

anniversary in 2023. To reach USD 100 billion of exports with a share of 2.3 percent of the global

market, the Turkish machinery industry is projected to have a CAGR of 17.8 percent until 2023.

By that time, the sector’s share of Turkey’s exports is expected to be no less than 18 percent.

12. Manufacturing

The manufacturing industry is one of the main drivers of the Turkish economy, accounting for

24.2 percent of total GDP. The Turkish manufacturing industry has been growing over the past

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decade and increasing at a CAGR of 11 percent since 2004. In 2014 it exceeded gross domestic

product growth levels and reached approximately USD 104 billion.

 

The Turkish manufacturing sector recovered quickly after the 2009 global economic recession

and the growth rates exceeded pre-crisis levels with a CAGR of 6.8 percent between 2009 and

2014. The recovery in the Turkish manufacturing sector is enviable when compared globally;

according to the OECD, manufacturing CAGR was 5.7 percent in Poland; 4.4 percent in Mexico;

3.5 percent in India, and 1.2 percent in Brazil during the same period.

 

It is not surprising that Turkey has been emerging as a regional manufacturing hub. According to

the Deloitte Global Manufacturing Competitiveness Index (GMCI), over the next three years

Turkey will move up from 20th place in 2013 to 16th place in terms of current and future

manufacturing competitiveness. This means that Turkey will be the 2nd (after Germany) most

competitive manufacturing hub in the region covering EMEA (Europe, the Middle East and

Africa) as well as Central Asia and the Caucasus.

 

Located at the crossroads of Europe, Asia and Africa, Turkey has historically always been at the

epicenter of world trade routes. As major airway hubs in the region, Istanbul and Ankara

airports provide practical travel routes with a maximum direct-flight time of 4 hours to capital

cities throughout Europe, Western and Central Asia, the Middle East and Africa. This unique

location enables investors to access surrounding markets of 1.5 billion people, a combined GDP

of USD 25 trillion and more than USD 8 trillion in foreign trade, corresponding to approximately

half of total global trade. Moreover, Turkey has a Customs Union with the European Union,

which facilitates the free movement of industrial goods as it eliminates customs duties and

quantitative restrictions between Europe and Turkey. In addition, Turkey has negotiated free

trade agreements with 23 countries or economic groupings (17 in force), and has started

negotiations with a further 14 countries or economic blocks.

 

Thanks to its connectivity and trade partnerships, many multinational companies have either

established their manufacturing bases in Turkey or moved their regional headquarters there, as

the country offers a robust platform for economic expansion on a regional scale which enables

these companies to leverage common qualities and local capabilities in Turkey. The Turkish

government strongly supports the move of global company regional headquarters to Turkey.

With a recent amendment to FDI legislation, foreign companies can now establish their regional

management centers in Turkey under a liaison office structure without paying corporate tax,

VAT, personal income tax or stamp duty.

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With half of its population under the age of 30, Turkey’s young and dynamic population is

creating one of the most skilled labor pools in the world. The number of students graduating

from manufacturing-related departments in universities exceeded 32,000 in 2012, while there

were more than 35,000 graduates from vocational training schools during the same period.

Moreover, around 600,000 students graduate from universities in Turkey every year. This labor

force, coupled with productivity and a disciplined work ethic, makes Turkey one of the most

appealing investment destinations in the world for high value-added, knowledge-based and

skills-intensive industries.

13. Mining

Turkey’s mining sector has grown in parallel with the country’s robust economy. The sector’s

total production value soared to USD 13.2 billion in 2014, up from USD 2.6 billion in 2003.

 

With its location in the Tethyan-Eurasian Metallogenic Belt, one specific kind of ophiolite

extending from the western Mediterranean via the Alps to southeastern Europe through Turkey,

the Lesser Caucasus, Iran, and the Himalayas to China, Turkey harbors much proven potential

for mining investors. As the least explored portion of the belt, Turkey stands out as a very

promising region for miners and explorers. In addition, as mining in Turkey has been limited to

surface excavations, huge potential with deep drilling is awaiting international investors.

 

Turkey’s young, dynamic and well-educated labor force offers a high-quality labor pool. There

are 24 mining engineering departments in 21 cities in Turkey, while five new mining

engineering departments have been opened since 2005. The number of mining engineers in

Turkey increased by more than 50 percent since 2005, reaching 20,000.

 

Turkey’s advantages for the players in the mining sector are not limited to a high-quality labor

pool, but also include relatively low logistics and drilling costs, proximity to major markets,

lucrative government incentives and highly competitive taxes.

 

As a result of its remarkable economic growth, years of political stability, structural reforms,

along with the backing of governmental bodies, Turkey attracted USD 449 million of FDI to its

mining industry in 2014, a great leap forward from USD 242 million of FDI in 2013, while mining

exports increased fourfold over the last decade from about USD 42 million to USD 260 million.

 

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These figures prove investors’ increased interest in Turkey, as today Turkey hosts more than

700 international mining companies, up from only 138 in 2004.

14. Real Estate

Turkey has undergone a profound economic transformation over the past decade and its

economic fundamentals are quite solid. It is the 17th largest economy in the world and the 6th

largest economy in Europe, with a GDP of approximately USD 800 billion in 2014.

 

The demand drivers of the Turkish real estate sector include the country’s advantageous

geographical location; extensive urban renewal and development; large capacity and strength in

the construction sector; population growth and demographic advantage; increasing per capita

income; and ease of doing business. The real estate sector accounted for a 4.6 percent share of

GDP in 2014 - an increase of 2.6 percent compared with the previous year. On the investment

side, FDI inflow rose to USD 12.5 billion, with real estate and construction garnering USD 4.3

billion of total FDI in 2014. The total number of houses sold in the property market reached

1,165,381 units in 2014; likewise sales of real estate to foreigners began to increase following

the cancellation of the reciprocity law.

 

The current situation, along with strategic plans and future projects in the pipeline, offers huge

potential for investors in Turkey’s real estate sector. According to the Knight Frank Global House

Price Index, which allows investors and developers to monitor and compare the performance of

mainstream residential markets across the world, in the first quarter of 2015 Turkey ranked

second only to Hong Kong in the 56-location index. In terms of the annual price growth index,

with an 18.5 percent rate of increase, Turkey emerged as the best-performing housing market in

Europe, ahead of Ireland, Luxembourg, Estonia, and Iceland. Urban renewal and mega projects

dominate the agenda for the foreseeable future, particularly in Istanbul with projects such as

Marmaray, Canal Istanbul, the third Bosphorus bridge, and Istanbul’s third airport.

 

Turkey’s office space market, one of the most important dynamics of the real estate sector, holds

huge potential for investors. Office construction licenses obtained throughout Turkey increased

by 27 percent, hitting 6.84 million square meters. Class A office space supply is expected to reach

6.5 million square meters by the end of 2017 with the completion of projects like the Istanbul

Finance Center. Initiated in 2009, the Istanbul Finance Center is a project to build and create a

financial district in Istanbul that will become both a regional and global financial hub. The

expected cost of the project will be approximately USD 2 billion. According to projections, the

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Istanbul Finance Center will provide employment for 30,000 people. Once completed, the

financial district will be larger than its counterparts in New York and London.

 

As a well-known tourism destination, Turkey is the 6th most popular tourist destination in the

world. From 2002 to 2014, the number of international tourist arrivals increased 200 percent to

39.8 million. By the end of 2014 there were 13,436 registered accommodation facilities,

accounting for a combined capacity of more than 1,250,000 beds. There are currently 281

projects in the pipeline that would add 74,130 much needed beds to Turkey’s short supply. As of

2014, there are more than 165 hotel chains in Turkey, with 15 percent of these hotels being

owned by international investors.

 

Moving to the retail market, remarkable growth has been driven by high retail demand. Oxford

Economics’ forecasts indicate a 3.2 percent growth in retail sales between 2014 and 2018,

higher than mature European markets. There has been a 7 percent increase in leasable areas in

the retail sector, from 9.49 million square meters to 10.24 million square meters. At the end of

2014, there were 350 operational shopping centers in Turkey. The number of shopping centers,

including the projects that have already been announced, is expected to exceed 400 by 2017.

Combined, these centers would account for 12.5 million square meters of rentable area. Istanbul

will definitely continue to maintain its charm for retail investors in the coming years. The

Istanbul Metropolitan Area has 104 shopping centers with a total gross leasable area of

3,809,736 million square meters. With these figures, according to JLL’s Cross Border Retailer

Attractiveness Index 2015, Istanbul is the 7th most attractive market in Europe after London,

Paris, Moscow, Milan, Madrid, and Rome. Yet compared to the European average of total leasable

area per person, Turkey is hovering below the average. This shows potential for further retail

growth in Turkey.

Apart from the above factors, one of the most important sub sectors, which will affect real estate

market potential very positively in the near future, is urban renewal. The population growth and

fast urbanization trend in metropolitan cities play vital roles in increasing the volume of urban

renewal projects and the housing renewal process. It is estimated that around 6.7 million units

nationwide will be demolished and rebuilt over the next 20 years, meaning an average of

334,000 units per year. Around TRY 44 billion (USD 15 billion) of financing will be required each

year for urban renewal projects. In total, a budget of USD 400 billion has been allocated for this

initiative, with the private sector taking the lead role.

 

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As one of the most promising real estate markets in Europe with a large number of projects

attracting international attention, it is no wonder Turkey has been named the Country of Honor

for the second year in a row at MIPIM (the world’s property market) in 2014.

 

Some of the key facts and figures in the Turkish real estate sector include:

 

350 shopping centers are operational in Turkey with a total gross leasable area of 10.24

million square meters.

104 shopping centers in Istanbul with a total gross leasable area of 3,809,736 million

square meters represent 37 percent of the total leasable shopping center area in Turkey.

Office construction licenses obtained throughout Turkey have reached 6.84 million

square meters of office space.

According to the Turkish State Railways’ (TCDD) investment program, USD 240 million

will be spent on building logistics centers.

By the end of 2014, there were 13,436 registered accommodation facilities. 9,188 of

these facilities were licensed by their respective municipalities, while the remaining

4,248 held tourism operation licenses. The combined total bed capacity of these facilities

exceeds 1,250,000, although there is still a gap between supply and demand, particularly

in Istanbul.

There are currently 281 projects in the pipeline that would add 74,130 much needed

beds to Turkey's short supply.

 

Strategically situated at the crossroads of Europe, the Middle East, and Central Asia, and home to

almost 78 million people, Turkey has easy access to 1.5 billion consumers and has undergone a

profound economic transformation over the past decade. The country is a major energy corridor

and serves as a terminal connecting Europe, Central Asia, and the Middle East. With its favorable

location, existing potential, mega projects, and ambitious targets for 2023, Turkey offers great

opportunities for investors by combining a large construction sector with growing commercial

and industrial output.

15. Tourism

As a well-known tourism destination, Turkey continues to present investment opportunities

both in the established and newly developing subsectors of the industry. Turkey is currently the

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6th most popular tourist destination in the world, attracting more than 30 million tourists

annually and continuing to show positive growth year-on-year.

 

The Turkish tourism industry’s energetic and continuous growth remains unhindered by the

negative effects of the recent global economic crisis, and there is still an immense amount of

untapped potential in the sector. Breathtaking coastlines along the Aegean and Mediterranean

Seas, with long sandy beaches and pristine bays, contribute significantly to this robustly growing

industry. Adding to Turkey’s natural riches, the country is the birthplace of many ancient

civilizations that left their mark on history. The vast number of archeological sites dotting the

landscape of Anatolia reminds one of the various empires and diverse cultures, some dating back

millennia, that once thrived there. From Ephesus in the west to Mount Nemrut in the east and

further beyond, it is common to encounter sacred sites, temples and religious grounds belonging

to various cultures and beliefs.

 

A flurry of new hotel openings and brand hotel investments all over Turkey, not just in major

tourism centers like Antalya, Mugla and Istanbul, will go a long way towards helping the tourism

sector meet and exceed targets for 2023. The increasing number of airports (12 new airports in

the last five years), investments in transportation infrastructure, the rapid growth of Turkish

Airlines, and government grants have all played a role in the expansion of hotel properties in

Turkey. There are currently 281 projects in the pipeline that would add 74,130 much needed

beds to Turkey’s short supply. As a result of being the 6th most popular tourism destination in

the world, many global hotel chains have targeted the country for growth. In 2014, there were

more than 165 hotel chains in Turkey, with 15 percent of these hotels being owned by

international investors. Total turnover of the tourism industry exceeded USD 34 billion in 2014,

an increase of 6 percent compared to the previous year.

 

According to the Ministry of Culture and Tourism, the number of foreign travelers arriving in

Turkey in 2014 was 39.8 million, up 5 percent compared to 2013 and a good 200 percent better

than the 2002 numbers. Antalya is the most preferred city in Turkey based on the number of

incoming foreign visitors. Visited by 34 percent of the foreign tourists, Antalya has over 500 4-

star and 5-star hotels in its center and surrounding towns such as Kemer, Belek and Kas.

Following Antalya, Istanbul hosted 32 percent of the foreign tourists, while the capital, Ankara,

saw 1 percent of the tourists. Along the Aegean coast, Mugla hosted 9 percent of foreign visitors,

followed by Izmir and Aydin with 4 percent and 2 percent respectively. Further inland, Denizli -

home of Pamukkale - and Nevsehir - home of Cappadocia - each hosted 3 percent of the visitors.

 

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Looking at the tourism infrastructure, by the end of 2014 there were 13,436 registered

accommodation facilities. 9,188 of these facilities were licensed by their respective

municipalities, while the remaining 4,248 held tourism operation licenses. The combined total

bed capacity of these facilities exceeds 1,250,000.

 In terms of geothermal tourism potential, Turkey is among the top seven countries in the world

and ranks 1st  in Europe with its 1,500 thermal springs. Bed capacity in the various thermal spa

resorts has reached a combined 55.140.

 

Turkey is also an emerging destination for golf tourism with 15 tourism operation licensed golf

resorts. Most golf courses in Turkey use Bermuda grass, which is perfect for a Mediterranean

climate and can be used for more than a decade. Turkish Airlines continues to make impressive

strides in the world of golf by sponsoring and supporting several prestigious professional and

amateur events. The Turkish Airlines World Golf Cup was launched in 2013 and spans 12 cities

globally. The company has also entered its 5th year sponsoring the Turkish Airlines Ladies Open,

one of the Ladies European Tour’s most popular events. In 2015, Europe’s finest golfers and

many greats from elsewhere around the world will head to Turkey for the Turkish Airlines Open

presented by the Ministry of Youth and Sports.

 

Here are some of the essential facts and figures in the Turkish tourism sector:

 

The tourism sector has set annual targets of 50 million tourist arrivals and revenues of USD 50

billion by 2023.

Growth in the Turkish tourism industry has been above the global average in recent years and the

direct contribution of the industry to the GDP reached USD 34 billion in 2014.

Turkey is the 6th most popular tourist destination in the world with an ever-increasing number of

visitors. From 2002 to 2014, the number of international tourist arrivals increased 200 percent,

reaching more than 39.8 million foreign visitors.

By the end of 2014, there were 13,436 registered accommodation facilities in Turkey. 9,188 of

these were municipality-licensed and 4,248 held tourism operation licenses. The total combined

bed capacity exceeds 1,250,000.

In terms of geothermal tourism potential, Turkey is among the top seven countries in the world

and ranks 1st in Europe with its 1,500 thermal springs. Bed availability in thermal vacation

resorts has reached 55,140.

Turkey has 7,200 km of coastline and ranks 2nd among 38 countries with its 436 blue-flag

beaches; only Spain has more blue-flag beaches with 578. There are also 22 blue-flag marinas in

Turkey.

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Turkey is an emerging destination for golf tourism, with 15 tourism operation licensed golf

resorts. Most golf courses in Turkey use Bermuda grass, which is perfect for a Mediterranean

climate and can be used for more than a decade.

Owing to its increasing global connectivity, due in no small part to its favorable geographical

position, Istanbul is very much the center of attention with its recent rise to the 5th most visited

city according to MasterCard Global Destinations Cities Index 2015 (With over 11.8 million

foreign and domestic visitors annually).

It is not just tourism driving the growth of visitors to Istanbul; the city remains a preferred site

for hosting international meetings. The International Congress and Convention Association's

(ICCA) Country and City Rankings Report for 2014 saw Istanbul maintain its top 10 position as a

global congress destination. Ranking 9th in the world in 2014 with 130 congresses, Istanbul has

now held a top 10 position since 2010.

 

The Turkish tourism sector continues to grow at a rate that outstrips its bed capacity and even

though there has been a surge of investments in the last several years, there is still ample room

for new investments. Eastern and Southeastern Anatolia both have untapped potential for

culture tourism as well as the increasingly popular boutique hotel concept that blends well with

the regions’ characteristic nature, history and culture.

 

The Turkish government offers incentives and pursues policies that offer reduced utility prices

and reduced tax rates while decisively eliminating any bureaucratic barriers that may hinder

sectorial growth. The combined efforts of the government and industry organizations have

already enabled the rise of investment in new areas, such as construction of large convention

and expo centers that have contributed to a boom in the events industry, particularly in the

country’s largest city, Istanbul.

 

As mentioned above, the country is the 6th most popular tourist destination in the world and is

well on its way to attracting more than 40 million tourists annually within the next couple of

years. With its favorable location, existing potential, mega projects, and ambitious targets for

2023, Turkey offers great opportunities for investors by combining a large tourism sector with

growing commercial and infrastructure output.

16. Transportation and Logistics

Turkey, one of the most vibrant economies among emerging countries, has been a natural bridge

between the East and the West, serving as a junction between the continents of Asia and Europe.

 

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Turkey’s strategic location provides access to multiple markets with 1.6 billion people, a

combined GDP of USD 27 trillion and more than USD 8 trillion of foreign trade which

corresponds to around half of the total global trade. Trade in Turkey has been rising significantly

and the region has more of a presence in global trade. In 2014, almost 1.1 percent of the global

trade volume was conducted by Turkey, and the country’s share in global trade is expected to

exceed 1.5 percent by 2025.

 

The Turkish economy, which has been growing at an average annual growth rate of almost 5

percent over the last 12 years, provides many opportunities for the logistics sector. In addition

to its robust economic growth, Turkey has one of the largest and youngest labor pools in Europe

with more than 65 percent of its population aged between 24 and 54. The strength of Turkey’s

labor force is reflected in the logistics industry. Investors can easily hire a talented workforce at

a competitive cost to address the complex demands of the industry.

 

Both public and private infrastructure investments in the last ten years have significantly

improved the logistics services provided in the country. Many new airports have been built, dual

carriageways have spread across the country, the high-speed train network has started to reach

major cities and the capacity of Turkish ports has been increased. The Turkish government has

set challenging targets to be achieved by 2023 for improving the logistics infrastructure even

more. These targets include, but are not limited to:

 

Building an additional 15,000 km of dual carriageways and highways

Increasing the shares of railway transportation to 10 percent and 15 percent in passenger and

freight transportation respectively

Building an additional 9,000 km of high-speed train lines

Constructing new airports with a total annual capacity of 400 million passengers

Increasing the share of sea freight transportation to 10 percent in total freight transportation and

containerization by 15 percent

Building three large ports in each seas surrounding Turkey

 

Turkey’s advantageous geographical location, which provides easy access to Eastern Europe,

Central Asia, the Middle East and North Africa, allows the country to function as a hub for over

USD 2 trillion worth of freight carried in the region. Turkey’s current logistics industry size is

estimated to be USD 80-100 billion and is forecast to reach USD 150-200 billion by 2023.

 

Turkey is also building logistics centers/villages that will serve to lower the costs of

transportation by offering various different modes of transportation within these

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centers/villages. It is estimated that, by 2023, the total freight carried in the centers/villages will

reach a total of USD 500 billion.

4. TARGET PRODUCTS for THAI EXPORTERS

4.1. Rubber

Turkey needs the rubber as a raw material for industrial use. There is a strong bond between

Turkey and Thailand Rubber Associations.

4.2. Food

Food market in Turkey is growing rapidly due to the trend of healthy living/organic living and

city life is open to Asian Cuisine. Turkish people recently got the taste of Thai Food and products

so Importer Companies are taking the chance to introduce new products. TTC and Embassy’s

Thai Food Promotion activities have also took attention and turned out with to positive effect

with the market.

4.3. Jewelry

Turkey imports precious/ semi-precious stones and silver from Thailand. There are several

Turkish Companies have their production unit in Thailand.

4.4. Air- conditioning and Parts

Major players of the industry like Vestel, Arçelik etc. import rubber parts from Thailand.

5. FOREIGN INVESTMENT

5.1.Investment

Turkey’s investment legislation is simple and complies with international standards, while it

offers equal treatment for all investors. The backbone of the investment legislation is made up of

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the Encouragement of Investments and Employment Law No. 5084, Foreign Direct Investments

Law No. 4875, the Regulation on the Implementation of the Foreign Direct Investment Law,

multilateral and bilateral investment treaties and various laws and related sub-regulations on

the promotion of sectorial investments.

 

Recent amendments to the existing law improve Turkey’s investment environment still further.

 

Legal Framework of Foreign Direct Investment

 

1. Foreign Direct Investment (FDI) Law No. 4875

 

The aim of the Foreign Direct Investment (FDI) Law No. 4875 is:

to encourage FDI in the country

to protect the rights of investors

to align investors and investments with international standards

to establish a notification-based system rather than an approval-based one for FDI

to increase the volume of FDI through streamlined policies and procedures 

The FDI Law provides a definition of foreign investors and foreign direct investments. In

addition, it explains important principles of FDI, such as freedom to invest, national treatment,

expropriation and nationalization, freedom of transfer, acquisition of immovable property,

national and international arbitration and alternative dispute settlement methods, valuation of

non-cash capital, employment of foreign personnel, and liaison offices.

The Regulation on the Implementation of the FDI Law consists of:

 

specifying the procedures and principles set forth in the FDI Law

 

The aim of the FDI Law with regard to the work permits for foreigners is: 

to regulate the work carried out by foreigners

to stipulate the rules on work permits given to foreigners

 

Bilateral Agreements for the Promotion and Protection of Investments

Bilateral Agreements for the Promotion and Protection of Investments were signed from 1962

onwards with countries that show the potential to improve bilateral investment relations. The

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basic aim of bilateral investment agreements is to establish a favorable environment for

economic cooperation between the contracting parties by defining standards of treatment for

investors and their investments within the boundaries of the countries concerned. The aim of

these agreements is to increase the flow of capital between the contracting parties, while

ensuring a stable investment environment. In addition, by having provisions on international

arbitration, they aim to prescribe ways to successfully settle disputes that might occur among

investors and the host state. Turkey has signed Bilateral Investment Treaties with 94 countries.

However Turkey is a dualist country, where an international treaty has to be ratified and

promulgated in order to become part of the national legal system. Within this regard, 75

Bilateral Investment Treaties out of these 94 have gone into effect so far.

 

75 countries

 

Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium-

Luxembourg, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cuba, Czech Republic, Denmark,

Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia,

Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya,

Lithuania, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, Oman,

Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia,

Senegal, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Syria,

Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, United States of

America, United Kingdom, Uzbekistan, Yemen

 

 Double Taxation Prevention Treaties

 

Turkey has signed Double Taxation Prevention Treaties with 80 countries. This enables tax paid

in one of two countries to be offset against tax payable in the other, thus preventing double

taxation.

 

80 countries

 

Albania, Algeria, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Bosnia

and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Egypt,

Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran,

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Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania,

Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, New

Zealand, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi

Arabia, Serbia and Montenegro, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain,

Sudan, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkish Republic of Northern

Cyprus, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States of

America, Uzbekistan, Yemen

 

 Turkey is continuing to expand the area covered by the Double Taxation Prevention Treaty by

adding more countries on an ongoing basis.

 

Social Security Agreements

 

Turkey has signed Social Security Agreements with 25 countries. These agreements make it

easier for expatriates to move between countries. The number of these countries will increase in

line with the increased sources of FDI.

 

25 countries

 

Albania, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, Canada and the

Province of Quebec, Croatia, Czech Republic, Denmark, France, Georgia, Germany, Libya,

Luxembourg, Macedonia, Netherlands, Norway, Romania, Slovakia, Serbia, Sweden, Switzerland,

Turkish Republic of Northern Cyprus, United Kingdom

 

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Special Investment Zones 

There are three types of special investment zones in Turkey:

 

1. Technology Development Zones - Technoparks

 

Technology Development Zones (TDZs*) are areas designed to support R&D activities and

attract investments in high technology fields.

 

There are 59 TDZs of which 44 are operational and 15 have been approved and are currently

under construction.

 

Advantages of TDZs

 

Revenues derived from software development and R&D activities are exempt from

income and corporate taxes until December 31, 2023.

Sales of application software produced exclusively in TDZs are exempt from VAT until

December 31, 2023. Examples include software for systems management, data

management, business applications, different business sectors, the Internet, mobile

phones and military command control.

Salaries of R&D and support personnel employed in the zone are exempt from all taxes

until December 31, 2023. The number of the support personnel covered by the

exemption shall not exceed 10 percent of the number of the R&D personnel.

Investments for the production of the technological product obtained as a result of the

R&D projects conducted in the zone may be made in the TDZ, if deemed suitable by the

operator company and allowed by the Ministry.

50 percent of the employer’s share of the social security premium will be paid by the

government for 5 years until 31.12.2024.

 

2. Organized Industrial Zones

 

Organized Industrial Zones (OIZs*) are designed to allow companies to operate within an

investor-friendly environment with ready-to-use infrastructure and social facilities. The existing

infrastructure provided in the zones includes roads, water, natural gas, electricity,

communications, waste treatment, and other services.

 

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There are 290 OIZs in 80 provinces, 211 of which are currently operational, while the remaining

79 OIZs are being constructed throughout Turkey.

 

Advantages of OIZs

 

In addition to the investment incentives scheme in Turkey (general investment incentives,

regional investment incentives, large-scale investment incentives, strategic investment

incentives, employment incentives, R&D support, etc.), investors operating in the OIZs can

benefit from the following advantages:

 

No VAT for land acquisitions.

Exemption from real estate duty for five years starting after the construction of the plant.

Low water, natural gas, and telecommunication costs.

For unification and/or separation of plots, no tax to be paid. Exemption from

municipality tax for construction and usage of the plant.

Exemption from the municipality tax on solid waste if the OIZ does not benefit from the

municipality service.

 

3. Free Zones

 

Free zones are special sites considered to be outside the customs area, although they are within

the political borders of the country. These zones are designed to increase the number of export-

focused investments. Legal and administrative regulations in the commercial, financial, and

economic fields that are applicable within the customs area are either not implemented or

partially implemented in the free zones.

There are 20 FZs* in Turkey (19 are operational) located close to the EU and Middle Eastern

markets adjacent to major Turkish ports on the Mediterranean, Aegean, and Black Seas, with

easy access to international trade routes.

Advantages of FZs

 

100% exemption from customs duties and other assorted duties.

100% exemption from corporate income tax for manufacturing companies.

100% exemption from value added tax (VAT) and special consumption tax.

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100% exemption from income tax on employees’ salaries (for companies that export at

least 85% of the FOB value of the goods they produce in the free zones).

Goods can remain in free zones for an unlimited period.

Companies are free to transfer profits from free zones to abroad as well as to Turkey,

without restrictions.

5.2. Incentives

Turkey's Investment Incentives System

The new investment incentives scheme is specifically designed to encourage investments

with the potential to reduce dependency on the importation of intermediate goods vital

to the country’s strategic sectors.

Amongst the primary objectives of the new investment incentives scheme are: reduce

the current account deficit; boost investment support for lesser developed regions;

increase the level of support instruments; promote clustering activities; and to support

investments that will create the transfer of technology. 

Effective as of January 1, 2012, the new investment incentives system has been

comprised of four different schemes. Local and foreign investors have equal access to:

1- General Investment Incentives Scheme

2- Regional Investment Incentives Scheme

3- Large-Scale Investment Incentives Scheme

4- Strategic Investment Incentives Scheme

The support instruments to be provided within the framework of the various investment

incentives schemes are shown in the following table:

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1. General Investment Incentives Scheme

 

Regardless of the region where investment takes place, all projects meeting both the specific

capacity conditions and the minimum fixed investment amount are supported within the

framework of the General Investment Incentives Scheme. Some types of investments are

excluded from the investment incentives system and would not benefit from this scheme.

 

The minimum fixed investment amount is TRY 1 million in Region 1 and 2, and TRY 500,000 in

Region 3, 4, 5 and 6.

 

Major investment incentive instruments are:

 

1) Exemption from customs duties:

Customs tax exemption for imported machinery and equipment for projects with an investment

incentive certificate.

 

2) VAT exemption:

VAT exemption for imported or domestically purchased machinery and equipment for projects

with an investment incentive certificate. 

 

2. Regional Investment Incentives Scheme

 

The sectors to be supported in each region are determined in accordance with regional potential

and the scale of the local economy, while the intensity of support varies depending on the level

of development in the region.

 

The minimum fixed investment amount is defined separately for each sector and region with the

lowest amount being TRY 1 million for Region 1 and 2, and TRY 500,000 for the remaining

regions.

 

The terms and rates of support provided within the Regional Investment Incentives Scheme are

shown in the following table.

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The new investment incentives system defines certain investment areas as “priority” and offers

them the regional support extended to Region 5 by the Regional Investment Incentives Scheme,

regardless of the region of the investment. If the fixed investment amount in priority

investments is TRY 1 billion or more, tax reduction will be applied by adding 10 points on top of

the “rate of contribution to investment” available in Region 5. If priority investments are made in

Region 6, the regional incentives available for this particular region shall apply.

 

Fields of investment with specific priorities to be supported with Region 5 instruments regardless of

the investment’s region are:

 

Tourism accommodation investments in Cultural and Tourism Preservation and

Development Regions and investments that could benefit from regional incentives with

regard to thermal tourism

Mine extraction and/or processing investments

Mining exploration investments to be made in the licensed areas by investors with a

valid Exploration License or Certificate issued pursuant to the Mining Law

Railroad and maritime freight or passenger transportation investments

Investments in the defense industry to be made with respect to the project approval

received from the Undersecretariat for Defense Industry.

Test centers, wind tunnels, and similar investments made for the automotive, aerospace

or defense industries

Investments made by the private sector for kindergartens and day-care centers, as well

as preschools, primary, elementary, and high schools

International trade fair investments with a minimum indoor area of 50,000 square

meters (excluding accommodation and shopping center units)

Investments for the manufacturing of products or parts developed by an R&D project

that is supported by the Ministry of Science, Industry and Technology, TUBITAK or

KOSGEB

Investments in the motor vehicles main industry worth a minimum amount of TRY 300

million, engine investments worth a minimum amount of TRY 75 million, and

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investments for motor engine parts, transmission components/parts and automotive

electronics worth a minimum amount of TRY 20 million

Investments for power generation where metals stated in the 4-b group of Article 2 of

the current Mining Law No. 3213 within the scope of a valid mining license and permit

issued by the Ministry of Energy and Natural Resources are used as inputs

Energy efficiency investments that would reduce energy consumption in unit production

by a minimum of 20 percent for at least 5 years in existing manufacturing facilities with

an annual consumption of least 500 tons of oil equivalent (toe) energy

Investments for electricity generation through waste heat recovery in a facility

(excluding natural gas-fired electricity generation plants)

Liquefied natural gas (LNG) investments and underground gas storage investments with

a minimum amount of TRY 50 million

Investments for the production of carbon fiber or composite materials made from

carbon fiber provided that it takes place along with carbon fiber production

Investments for the production of items in high-tech industry segment stipulated in the

Organization for Economic Cooperation and Development’s (OECD) definition for

technology intensity 

Priority investments with a minimum fixed investment amount of more than TRY 3

billion are considered to be strategic investments. Yet, the amount of interest support for

these investments cannot exceed TRY 700,000

Investments for the production of turbines and generators used in renewable energy

generation, as well as investments for the production of blades used in wind energy

generation

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3. Large-Scale Investment Incentives Scheme

12 investment subjects, which will potentially foster Turkey’s technology, R&D capacity and

competitiveness, are supported by Large-Scale Investment Incentives Scheme instruments. 

The terms and rates of support provided within the Large-Scale Investment Incentives Scheme

are shown in the following table.

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The following categories of investment within the Regional and Large-Scale Investment

Incentives Schemes can benefit from support granted to a one-grade lower region in terms of tax

reduction and social security premium support (employer’s share).

 

Investments in Organized Industrial Zones (OIZ)

Joint investments to be made by at least five companies operating in the same sector

with the purpose of greater integration

 

E.g.: A Region 3-level investment in an OIZ can take advantage of the tax reduction level in

Region 4. Similarly, a Region 6-level investment may benefit from an additional 5% contribution

to the investment.

4- Strategic Investment Incentives Scheme 

 

Investments meeting the criteria below are supported within the framework of the Strategic

Investment Incentives Scheme:

 

The domestic production capacity for the product to be manufactured with the

investment shall be less than the import of the product.

The investment shall have a minimum investment amount of TRY 50 million.

The investment shall create a minimum added-value of 40% (this condition is not

applicable to refinery and petrochemicals investments).

The total import value of the product to be manufactured with the investment shall be

minimum of USD 50 million as of the past one year (excluding products that are not

locally produced).

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The terms and rates of support provided within the Strategic Investment Incentives Scheme are

shown in the following table. 

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Support Instruments

 

VAT Exemption:

VAT is exempt for imported and/or domestically delivered machinery and equipment within the

scope of the investment incentive certificate.

 

Customs Duty Exemption:

Customs duty is exempt for imported machinery and equipment within the scope of the

investment incentivecertificate.

 

Tax Reduction:

The income or corporate tax is calculated on basis of reduced rates until the total amount of

reduced tax reaches the amount of contribution to the investment. The rate of contribution to

investment refers to the rate of the total fixed investment amount that is subject to tax

reduction.

 

Social Security Premium Support (Employee’s Share):

For additional employment created by the investment, the employee’s share of the social

security premium calculated on basis of the legal minimum wage will be covered by the

government. The instrument is applicable only to investments made in Region 6 within the

scope of the investment incentive certificate. There is no upper limit for Social Security Premium

Support and it is applicable for 10 years.

 

Income Tax Withholding Allowance:

The income tax with regard to additional employment created by the investment, within the

scope of the investment incentive certificate, will not be liable to withholding taxes.

The instrument is applicable only to investments made in Region 6 within the scope of the

investment incentive certificate. There is no upper limit for income tax withholding allowance

and it is applicable for 10 years.

 

Interest Rate Support:

Interest rate support is a financial support instrument provided for investment loans with a

term of at least one year obtained within the scope of an investment incentive certificate. A

portion of the interest/profit share regarding the loan equivalent, at most 70 percent of the fixed

investment amount registered in the investment incentive certificate, will be covered by

the government.

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Land Allocation:

Land may be allocated for investments, with an investment incentive certificate, in accordance

with the rules and principles set by the Ministry of Finance, depending on the availability of such

land.

 

VAT Refund:

VAT collected on construction expenses, made within the scope of strategic investments with a

minimum fixed investment amount of TRY 500 million, will be rebated.

 

R&D support

 

1) R&D Law

 

The R&D Law provides special incentives for R&D investment projects in Turkey provided that a

minimum of 30 personnel are employed in an R&D center. The incentives within the new law

will remain in effect until 2024 and include:

 

100 percent deduction of R&D expenditure from the tax base if the number of researchers

exceeds 500, then in addition to the 100 percent deduction, half of the R&D expenditure

increase incurred in the operational year compared to the previous year will also be deducted.

Income withholding tax exemption for employees (this item will be effective until December

31, 2023.)

50 percent social security premium exemption for employers

Stamp duty exemption for applicable documents

Techno-initiative capital for new scientists up to TRY 100,000

Deduction from the tax base of certain funds granted by public bodies and international

organizations

 

2) Support for Technology Development Zones

 

The advantages in Technology Development Zones are:

 

Profits derived from software development and R&D activities are exempt from income and

corporate taxes until 31.12.2023.

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Sales of application software produced exclusively in TDZs are exempt from VAT until

31.12.2023. Examples include software for systems management, data management, business

applications, different business sectors, the Internet, mobile phones and military command

control.

Wages of R&D and support personnel employed in the zone are exempt from all taxes until

31.12.2023. The number of the support personnel covered by the exemption shall not exceed

10 percent of the number of the R&D personnel.

Investments for the production of the technological product obtained as a result of the R&D

projects conducted in the zone may be made in the TDZ, if deemed suitable by the operator

company and allowed by the Ministry.

50 percent of the employer’s share of the social security premium will be paid by the

government for 5 years until 31.12.2024.

 

3. Tubitak

(Scientific and Technological Research Council of Turkey) and TTGV (Turkish Technology

Development Foundation) both compensate or grant R&D related expenses and capital loans for

R&D projects.  Projects eligible for TUBITAK incentives:

Concept development

Technological research & technical feasibility research

Laboratory studies in the translation of a concept into a design

Design and sketching studies

Prototype production

Construction of pilot facilities

Test production

Patent and license studies

Activities concerning the removal of post-sale problems arising from product design

 

4. Support for SMEs

 

SMEs are defined as companies employing less than 250 employees and earning less than TRY

40 million in revenue or turnover per year.

 

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Incentives granted to SMEs include:

 

1. Exemption from customs duties

2. VAT exemption for imported and domestically purchased machinery and equipment

3. Credit allocation from the budget

4. Credit guarantee support

 

In order to meet financial needs of SMEs, a TRY 1 billion fund was transferred to the Credit

Guarantee Fund (KGF) by the Treasury to create credit capacity worth TRY 10 billion. The

guarantee limit is TRY 1,500,000 per SME and TRY 2,000,000 for the risk group that the SME

related to. KGF covers up to 80 percent of the loan.

 

5. KOSGEB support to SMEs (www.kosgeb.gov.tr)

 

The Small and Medium Sized Industry Development Organization (KOSGEB) makes significant

contributions to strengthening SMEs by various support instruments in financing, loan interest,

R&D, common facilities, market research, investment site, marketing, export, consultancy,

promotion, designing, industrial property, licensing and training. 

 

Industrial Thesis (SANTEZ) program

 

Direct financial support for new technology adaptation, process development, quality

improvement and environmental modification projects to be achieved via university

partnerships:

 

Up to 85 percent of the project budget could be supported by direct grants

Project term is 2 years, with a possible extension of 6 months

Expenditure on staff, travel, consumable materials, machinery equipment, consultancy

and relevant service procurements, transportation, insurance and customs are

supported

The application file could be approved within 4 months, and the project supervision

committee is independent

 

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Loans for technology development projects

 

The Technology Development Foundation of Turkey (TTGV) offers long term interest-free loans

for technology development, renewable energy production, energy efficiency improvement and

environmental impact-reduction projects.

 

Exemplary support for environmental projects:

 

The maximum contribution rate is 50 percent per project

Maximum budget of USD 1 million per project

The pay-back term is 4 years in total after project execution, including a one-year grace

period

 

Training support

 

ISKUR, the National Recruitment Agency, may support vocational training projects for a

maximum period of 6 months.

 

Direct salary support for interns, and unemployed candidates that are registered at

ISKUR, (partial wage=TRY 25/day) during the pre-employment training session

Social security premium expenses (Occupational accidents and occupational diseases)

are covered by ISKUR.

Program expenses such as the trainer's fee, energy and water bills are partially paid to

the employer by ISKUR. The total amount is calculated by the cost per trainee and the

employer must bill ISKUR for the services given.

ISKUR considers the employer (company) the legal party in this training program.

A certain number (percentage) of trainees must be employed after the program.

 

The Ministry of National Education cooperates for:

 

Vocational schools with the desired programs could be opened according to the decision

of the Ministry.

The general cost of a trainee team for the adaptation of every requested program on a

present vocational high school could be supported by the Ministry.

 

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State aid for exports

 

The main aims of this scheme are to encourage exports and to increase the competitiveness of

companies in international markets. This specific package mainly covers R&D activities, market

research, participation in exhibitions and international fairs, and expenditure for patents,

trademarks and industrial design.

5.3. Cost and Finance of Business

Investors can meet their need for project financing easily in the Turkish credit market. The

credit market consists of banks, factoring, leasing and insurance companies. There are three

types of banks in Turkey: deposit banks, development/investment banks and participation

banks.

 

Today, the Turkish banking system sets a good example to the global banking system in terms of

operation, providing financing for all types of projects or supporting them.

 

Another related business practice is called factoring. According to the Financial Leasing,

Factoring and Financing Companies Law No. 6361, factoring companies actually purchase

receivables  documented by invoices arising from goods and services sold and assume the risk of

payment. The other financing method is leasing, which is a financial product introduced by the

Law on Financial Leasing, No. 3226, dated 1985. Leasing in Turkey can be applied in the form of

domestic lease, cross-border lease, sale and lease back, and sales-aid lease. 

 

In addition to the ones based in Turkey, international developments banks, such as the European

Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), and the

International Finance Corporation (IFC) also provide funding for many projects in Turkey,

 

Banking Regulation and Supervision Agency: www.bddk.org.tr 

Banks Association of Turkey: www.tbb.org.tr 

EIB: www.eib.org 

IFC: www.ifc.org 

EBRD: www.ebrd.com

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5.4. Establishment

The New Turkish Commercial Code No. 6102 (“New TCC”) was published in the Official Gazette

on February 14, 2011. As stipulated in the New TCC and the Law on Effectiveness and

Implementation of the Turkish Commercial Code No. 6103 ("Code on Effectiveness of New

TCC”), the new code came into effect on July 1, 2012.

 

The main goal of the New TCC is to develop a corporate governance approach that meets

international standards; to foster private equity and public offering activities; to create

transparency in managing operations; and to align the Turkish business environment with EU

legislation, as well as for the accession process.

 

Major amendments in the New TCC can be outlined as:

 

Shareholding Structure

 

The New TCC allows the establishment of joint stock companies (A.Ş.) or limited liability

companies (Ltd. Şti.) with only a single shareholder.

 

According to the former code, joint stock companies could be established with a minimum of five

shareholders, while limited liability companies could be formed with a minimum of two

partners.

 

Therefore, the New TCC removes the obligation for foreign companies to secure mandatory

minority shareholders in order to comply with the minimum shareholder number requirements

by the former TCC. The shares of previously established companies can now be held by a single

party.

 

Board of Directors*

 

Under the New TCC, in compliance with the EU legislation, the board of directors may now be

comprised of a single person instead of at least three members. This offers foreign investors the

opportunity to do business more easily, as board meetings may be hindered if there are a large

number of shareholders that have to travel frequently between countries.

 

The New TCC does not require physical presence of board members; it allows board meetings to

be held in an electronic environment and board resolutions may also be approved via electronic

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signatures. Through these amendments, the New TCC will prevent foreign companies from

incurring unnecessary travel expenses.

 

Additionally, legal entities may be appointed as board members. This means foreign

shareholders no longer have to deal with red tape such as, excessive legal documents or holding

shareholder meetings in order to change board members. Different representatives may be

appointed as a board member on each occasion if he or she is entitled to by the legal entity.

 

The obligation that board members must be shareholders has also been abolished. According to

the New TCC, any independent individual may be a board member. This ensures a professional

board of directors that can act separately from shareholders, and in turn, boosting corporate

governance.

 

*in accordance with provisions pursuant to Joint-stock company (A.Ş.)

 

Registered Capital System

 

The New TCC offers non-public companies the opportunity to adopt a registered capital system,

so non-public joint stock companies may benefit from the opportunity of flexible capital

increases introduced by the registered capital system. This is seen as a great advantage for

foreign companies to increase capital whilst reducing bureaucracy and/or travel expenses.

 

Intellectual Property Rights

 

Intellectual property rights may be contributed as capital in-kind. In order to contribute such

assets as capital in-kind, those assets shall have transferable qualifications, and become eligible

for valuation in cash.

 

Ultra-Vires

 

The former TCC incorporated the doctrine of Ultra Vires that is “corporations can only be

authorized to acquire rights and undertake debts, provided that they conduct their business

within the field of operations defined in the articles of incorporation." This doctrine of Ultra

Vires was abolished on June 1, 2012, therefore, transactions of companies, which operate

outside the business areas specified in their articles of association, will be effective.

 

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Establishing a Business in Turkey

 

Turkey's regulatory environment is extremely business-friendly. You can establish a business in

Turkey irrespective of nationality, or place of residence.

 

Company Establishment in One Day

 

It is possible to establish a company in a single day by applying to the relevant trade registry

office with the required documents. The company is established once the founders declare their

intent to set up a joint stock company in the articles of association, which have been issued in

accordance with the law, and where they, with their notarized signatures, unconditionally

acknowledge and undertake to pay the whole capital. The company receives its “legal entity”

status upon registration with the trade registry.

 

Types of Companies

 

Incorporated companies such as a:

 

Joint-stock company (A.Ş.)

Limited liability company (Ltd. Şti.)

Commandite company

Collective company

Cooperative company

 

Joint Stock Company

 

The company’s stock capital is divided into shares and the liability of the shareholders is limited

to the subscribed capital and paid by the shareholder. At least one shareholder (real person or

legal entity) and a minimum capital of TRY 50,000 are mandatory. The mandatory company

shall include a general assembly and a board of directors.

 

Limited Liability Company

 

It is a company established with at least one shareholder (real person or legal entity) and the

liability of the shareholders is limited to the subscribed capital and paid by the shareholder. A

minimum capital of TRY 10,000 is mandatory.

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Commandite Company

 

It is the company established to operate a commercial enterprise under a trade name. Whereas

the liability of some shareholders is limited to the capital subscribed and paid by the

shareholder (commanditer), for some shareholders there is no limitation of liability. Legal

entities can only be commanditer. No minimum capital is required. The rights and obligations of

the shareholders are determined by the articles of association.

 

Collective Company

 

It is the company established to operate a commercial enterprise under a trade name and, the

liability of none of the shareholders is limited only to the capital subscribed and paid by the

shareholder. No minimum capital is required. It is mandatory that all the shareholders be real

persons. The rights and obligations of the shareholders are determined by the articles of

association.

 

Company Establishment Procedures

 

Three copies of articles of association (one copy original) which are notarized are prepared.

Following the notarization of articles of association, within 15 days at the latest, application to

the relevant trade registry office with the documents set below is needed. 

 

Documents for the Company Establishment

 

Letter of Undertaking (Trade Registry Regulation Article 24)

Articles of association including notarized signatures of founders and notary certification

proving that all shares constituting the registered capital have been subscribed by the

founders in the articles of association

Founders’ statement signed by the founders

The bank letter proving that the share capital has been deposited

The bank receipt indicating that 0.04% of the company capital has been deposited to the

account of the Turkish Competition Authority at a state bank

Permit or letter of compliance for companies whose corporation is subject to the permit

or letter of compliance issued by the relevant ministry or other official institutions

Notarized copy of signatures of persons with the authority to represent and bind the

company

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Application number indicating that the trade name to be used has been checked and

confirmed by the Trade Registry Office

Company establishment statement form (3 original copies)

Certificate of residence of founding partners

Notarized translation of passport in case the foreign shareholder is a real person;

apostilled and notarized translation of registry document issued by the competent

authority in case the foreign shareholder is a legal entity

5.5.Labour Regulations and Social Security

Terms of employment in Turkey are mainly governed by the Labor Law and Trade Union Law.

 

Pursuant to the Labor Law, there are various types of employment contracts:

 

Employment contracts for “temporary” and “permanent” work

Employment contracts for a “definite period” or an “indefinite period”

Employment contracts for “part-time” and “full-time” work

Employment contracts for “work-upon-call”

Employment contracts with a trial period

Employment contacts constituted with a team contract

 

Employment contracts are exempt from stamp tax and any type of duties and fees.

 

Any kind of discrimination among employees with respect to language, race, gender, political

opinion, philosophical approach, religion or similar criteria is prohibited by law. Discrimination

based on the gender of an employee is prohibited when determining the amount of

remuneration for employees working in the same or equivalent jobs.

 

Working Hours and Overtime

 

Under the Labor Law, the maximum regular working hours are 45 hours per week. In principle,

45 hours should be split equally among the working days.  However, in accordance with the

Labor Law, working hours may be arranged by the employer within the legal limits.

 

As a rule, hours exceeding the limit of 45 hours per week are to be paid as “overtime hours”.  The

wage/salary for each hour of overtime work is paid by raising the hourly rate of the regular

working salary by fifty percent. Instead of the overtime payment, employees may be granted 1.5

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hours of free time for every overtime hour worked.  Overtime hours worked during weekends

and public holidays are to be paid as wage for one day holiday and overtime wage.   These rates

may be increased on the basis of a collective or personal employment contracts between

employees and employers.  The total number of overtime hours worked per year may not exceed

270 hours.

Annual Paid Vacation

 

There are six paid public holidays per year (January 1st, April 23rd, May 1st , May 19th, August 30th,

October 29th), plus two paid periods of religious holiday, which comes to eight days in total.

Employees are entitled to paid annual vacation for the periods indicated below, provided that

they have worked for at least one year including the probation period:

These benefits are the minimum levels set by law and may be increased on the basis of a

collective or personal employment contracts.

 

As per the Labor Law, in case the employer recruits at least 10 workers within the same

workplace or across the whole country; any premium, wage, compensation, etc. to be paid to

workers shall be paid in Turkish Lira (TRY) to the bank accounts of employees. If wage and

salary amounts are not paid into employees' bank accounts, an administrative penalty is charged

to the employer. It is possible to denominate wages/salaries in terms of a foreign currency. In

this case, wages/salaries shall be paid in TRY calculated on the basis of the relevant foreign

currency rate prevailing as of the payment date.

Termination of Employment Contract 

According to the relevant provisions of the Labor Law no. 4857, employers and employees are

required to give specified notification periods prior to the termination of an employment

contract, as shown in the following table.

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There are two types of termination for an employment contract:

1) Termination with notification

Both the employee and the employer may terminate an employment contract concluded

for an indefinite period based on the notification periods indicated in the above table. The

party who does not abide by the rule to serve notice shall pay compensation covering the

wages which correspond to the notification period in order to terminate the employment

contract.

2) Termination of an employment contract before the end of the contract period or before the

notification periods stated above, based on justifiable and rightful reasons stated in the Labor

Law

Both the employer and employee have the right to terminate an employment contract

before its expiry or without having to comply with the prescribed notification periods, in

the following cases:

Reasons of health

Cases arising from immoral, dishonorable or malicious conduct or other similar

behavior

Force majeure

Severance Pay

An employee who quits satisfying the conditions indicated in the Labor Law or whose

employment contract is terminated by the employer must be compensated with a

severance pay to be calculated based on the employees’ seniority at the work place. This

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indemnity pay is calculated on the basis of the last thirty days’ gross wage per year of the

employment contract from the commencement date of employment. The thirty days’

payment per year of employment may not exceed the upper limit determined semi-

annually. However, severance pay may be agreed to be paid at an amount higher than the

limit indicated above in case there is a provision in the employment contract.  The reasons

on the basis of which employees are entitled to receive severance pay are as follows:

Leaving the workplace due to the compulsory military service (for males)

Retirement (in order to receive old age, retirement pension or disability allowance

from the relevant insurance institutions)

Resignation of the employee after completing 3,600 premium days and 15 years of

insurance period (in case of fulfillment of retirement conditions except the age limit

and resignation with the submission of the document from the Social Security

Institution indicating the fulfillment of retirement conditions, excluding the age limit,

to the employer)

Voluntary termination by female employees within one year following the date of

marriage

Death of the employee

Termination of the employment contract not based on a valid reason listed in the

Labor Law by the employer and termination of the employment contract by the

employer with valid a reason

Job Security

According to Labor Law, in case the employment contract is terminated by the employer, it

is required that the underlying reason of this termination be notified to the employee, and

the reason of termination be valid. The employee has the right to file a lawsuit in Labor

Court within one month from the date of notification of termination. In the lawsuit to be

filed, liability of proving that termination is based on a valid reason belongs to the

employer, and if the employee claims that termination is due to another reason, he/she is

obligated to prove this claim. In case the court decides that the termination is invalid and

the employee is to be reemployed, and if the employee does not apply to the employer

within ten work days from the date of notification of the decision to him/her, termination

executed by the employer is deemed as a valid termination, and employer is only held

responsible for the legal consequences.

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Turkish Social Security System 

The social security system in Turkey went through a major transformation in 2007, resulting in

a more efficient and fast functioning system, based on centralizing the control of different social

security funds in a single institution. 

The three insurance funds, namely SSK, Emekli Sandigi and Bag-Kur, were merged under a sole

body called the Social Security Institution (SSI) in 2007. The three insurance funds together

cover around 81% of the population as of 2008. The system started to be fully operational at the

beginning of 2008.

Social Security Premium Payments

Social security premiums (as a percentage of employee's gross earnings) are payable by both

employers and employees. To given an outline, the below table shows the rates regarding the

issue.

Foreigners making social security contributions in their home countries do not have to pay the Turkish social security premiums if there is a reciprocal agreement between the home country and Turkey.

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Unemployment Insurance Premium Payments 

Employees, employers and the state are required to make a compulsory contribution to the

Unemployment Insurance Plan at the rates of 1%, 2% and 1%, respectively, of the gross salary of

the employee. Like the social security premium payments, unemployment insurance premiums

are also to be paid on a monthly basis. Employers are able to deduct such contributions from

their taxable income. On the other hand, an employee’s contributions are deductible from the

income tax base of the employee.

A foreign individual who remains covered under the compulsory social security system of

his/her home country that has a social security agreement in effect with Turkey is not liable for

insurance payments to the Turkish social security. The proof of foreign coverage is to be filed

with the local social security office. If the employee is not subject to a foreign social security, full

contributions will generally be imposed. Unemployment insurance premiums are declared and

paid to the Social Security Institution together with social security premium contributions.

5.6. Taxes

Turkey has one of the most competitive corporate tax rates in the OECD region. The Turkish

corporate tax legislation has noticeably clear, objective and harmonized provisions which are in

line with international standards. The Turkish tax legislation can be classified under three main

headings:

 

Income Taxes

 

The Turkish tax legislation includes two main income taxes, namely individual income tax and

corporate income tax. Although individual income tax and corporate income tax are governed by

different laws, many rules and provisions pursuant to individual income tax also apply to

corporations, particularly in terms of income elements and the determination of net income.

 1. Individual Income Tax

 

Real persons' income is subject to individual income tax. Income is defined as the net amount of

all earnings and revenues derived by an individual within a single calendar year. As per the

Income Tax Law, income may consist of the elements listed below:

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Business profits

Agricultural profits

Salaries and wages

Income from independent personal services

Income from immovable property and rights (rental income)

Income from movable property (income from capital investment)

Other income and earnings

 

According to the Turkish tax legislation, there are two main types of tax statuses regulated on

the basis of residence: resident taxpayers and non-resident taxpayers. Resident taxpayers (those

who reside in Turkey, and those who spend more than a continuous period of six months in

Turkey within a calendar year) are taxed on their earnings and incomes derived in and outside

Turkey, whereas non-residents (those who do not reside in Turkey and those who do not spend

more than a continuous period of six months in Turkey within a calendar year) are taxed only on

their earnings and incomes derived in Turkey.

 

Individual income tax rate varies from 15% to 35%.

 

Individual income tax rates applicable for 2016 are as follows:

2. Corporate Income Taxes

 

In case income elements specified in the Income Tax Law are derived by corporations, taxation

is applicable on the legal entities of these corporations. Corporate taxpayers defined in the law

are as follows:

 

Capital companies

Cooperatives

Public economic enterprises

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Economic enterprises owned by associations and foundations

Joint ventures

 

Corporations with legal or business centers located in Turkey are qualified as residents and are

subject to tax on their income derived in Turkey and other countries. If both the legal and

business centers are not located in Turkey, then these corporations are qualified as non-

residents and subject to tax only on their income derived in Turkey. The legal center is the place

stipulated in the Articles of Association or the incorporation law of corporations that are subject

to tax, while the business center is defined as the place where business activities are

concentrated and managed.

 

In Turkey, the corporate income tax rate levied on business profits is 20%.

 

Resident corporations are subject to a 15% withholding tax when dividends are paid out to

shareholders. However, dividends paid by resident corporations to resident corporations are

not subject to withholding tax. As a share capital increase by the corporation using the retained

earnings is not considered to be a dividend distribution, no withholding tax applies to dividends.

Similarly, non-resident corporations are subject to a 15% withholding tax during remittance of

such profits to the headquarters. Withholding tax is applied on the amount after the deduction of

corporate income tax from taxable branch profits.

Taxes on Expenditure

 

1. Value Added Tax (VAT)

 

The generally applied VAT rate is set at 1%, 8%, and 18%. Commercial, industrial, agricultural,

and independent professional goods and services, goods and services imported into the country,

and deliveries of goods and services as a result of other activities are all subject to VAT.

 

VAT exemptions include, but are not limited to, the following:

 

Exports of goods and services

Roaming services rendered in Turkey for customers outside Turkey (i.e. non-resident customers) in

line with international roaming agreements, where a reciprocity condition is in place

Contract manufacturing for clients operating in free zones

Petroleum exploration activities

Services rendered at harbors and airports for vessels and aircrafts

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Supply of machinery and equipment within the scope of an investment certificate

Transit transportation

Deliveries and services made to diplomatic representatives and consulates on condition of

reciprocity, international organizations with tax exemption status and to their employees

Banking and insurance transactions which are subject to Banking and Insurance Transactions Tax

 

2. Special Consumption Tax (SCT)

 

There are four main product groups that are subject to SCT at different tax rates:

 

Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents

Automobiles and other vehicles, motorcycles, planes, helicopters, yachts

Tobacco and tobacco products, alcoholic beverages

Luxury products

 

Unlike VAT, which is applied on each delivery, SCT is charged only once.

 

3. Banking and Insurance Transaction Tax

 

Banking and insurance company transactions remain exempt from VAT but are subject to a

Banking and Insurance Transaction Tax. This tax applies to income earned by banks, such as

loan interest. Although the general rate is 5%, some transactions, such as interest on deposit

transactions between banks, are taxed at 1%. No tax is levied on sales from foreign exchange

transactions since 2008.

 

4. Stamp Duty

 

Stamp duty applies to a wide range of documents, including contracts, notes payable, capital

contributions, letters of credit, letters of guarantee, financial statements, and payrolls. Stamp

duty is levied as a percentage of the value of the document at rates ranging from 0.189% to

0.948% and is collected as a fixed price (a pre-determined price) for some documents.

Taxes on Wealth

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 There are three kinds of taxes on wealth:

Property taxes

Motor vehicle tax

Inheritance and gift tax 

Buildings, apartments and land owned in Turkey are subject to real estate tax ranging at a rate

between 0.1% and 0.6%, while Contribution to the Conservation of Immovable Cultural Property

is levied at a rate of 10% of this real estate tax. Motor vehicle taxes are collected on the basis of

fixed amounts that vary according to the age and engine capacity of the vehicles every year.

Meanwhile, inheritance and gift taxes are levied at a rate of 1% to 30%.

 

Tax Incentives

 

Effective as of January 1, 2012, the investment incentives system comprises four different

schemes. Local and foreign investors have equal access to:

 

General Investment Incentives Scheme

Regional Investment Incentives Scheme

Large-Scale Investment Incentives Scheme

Strategic Investment Incentives Scheme

 

For detailed information about incentives:

www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/Incentives.aspx

5.7. Transferring Assets

The transfer of assets is described as the transfer of the ownership of a property from one legal

party to the other. While the matter of asset transfer is not specifically regulated under the

Turkish Legal System, various laws contain provisions directly or indirectly pertaining to this

matter. Among the provisions pertaining to asset transfers are the Articles 202 and 203 of the

Turkish Code of Obligations no. 6098 related to transfers of assets and operating rights, and the

Articles 134 to 158 of the Turkish Commercial Code no. 6102, which are related to mergers.

 

As per the Article 202 of the Code of Obligations; "the transferee who takes over an asset or an

enterprise with the assets and liabilities thereof shall be liable against the creditors for the debts

of the asset and the enterprise, starting as of the date when the transferee notified such transfer

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to the creditors or when the same is announced by way of promulgation in the Trade Registry

Gazette for the commercial enterprises, and for others, in any one of the newspapers with

circulation across Turkey. Nevertheless, the previous debtor shall remain liable as a joint debtor

together with the transferee for a period of two years. The said period shall start lapsing as of

the date of notification or announcement for the debts due, and for the debts to be due later, as

of the date when such debts fall due. The consequences of assuming the debts in this way are

identical to the consequences arising from an external assumption agreement. Unless the

obligation to notify or disclose by way of announcement is fulfilled by the transferee, the two-

year period provided for under the second paragraph shall not start lapsing." Likewise, as per

Article 203 of the same law; "If an enterprise is merged with another enterprise by mutual

takeover of the assets and liabilities or by the participation of one in the other, the creditors of

both enterprises shall have the rights arising from the transfer of an asset, and may receive and

collect all liabilities from the new enterprise." The transfer of an enterprise is specifically re-

regulated under the Article 11 of the Turkish Commercial Code, the scope and form of transfer in

the case of transfer of enterprise is regulated under a provision, and the mergers are specifically

regulated under the Articles 134-158.

 

In order to derive desired results from an M&A type of activity, first of all, it is necessary that the

Commercial Code, Code of Obligations and, specifically, the provisions of the legislation

governing the companies to ensure the merger be reviewed.

 

Pursuant to the aforementioned articles, when a legal person takes over an enterprise

(company) together with the assets and liabilities thereof, such legal person shall also be

responsible for the liabilities and receivables of such company. As deduced from the Articles 202

and 203 of the Turkish Code of Obligations, the transferor and the transferee shall be jointly

liable for the payment of debts for a period of two years as of the notification to the creditors or

announcement.

 

The relationship between the transferor and the transferee shall be subject to the agreement

made for the transfer of assets and liabilities of an enterprise. However, as per the Article 7 of

the Law No. 4054 on the Protection of Competition, mergers and transfers of a nature that would

create a dominant situation or strengthen an existing dominant situation in a specific sector

have been prohibited and transfers over a certain value, that would fall into this category have

been bound by permission by the Competition Authority. The legal approval of the transfer must

be announced by such means of communication as provided for under the legislation.

 

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The asset transfer are taxable since the transfer may be deemed to be the income of the

selling/transferring company, therefore a corporate tax liability shall arise. Asset transfer is

generally subject to VAT based on the sales value of the assets. Although the VAT rate varies for

different assets (1%, 8% and 18%), the general rate for VAT is 18%. VAT liability may be

reduced by various methods, such as investment incentive certificates.

 

Key articles respecting the asset transfer:

a) Turkish Code of Obligations: Article 202 and Article 203

b) Turkish Commercial Code: Articles 134-158

c) Execution and Bankruptcy Law: Article 280

d) Law on the Procedures for the Collection of Public Receivables: Article 30

e) Law on Competition: Article 7 

5.7.Regulatory Authorities

Regulatory and supervisory authorities are established in order to regulate different types of

markets, and to supervise and monitor market activities in accordance with these regulations or

malfunctions that may occur. Some of the important entities in Turkey are as follows: the

Competition Authority, the Energy Market Regulation Authority, the Banking Regulation and

Supervision Authority, the Information and Communication Technologies Authority, Tobacco,

Tobacco Products and Alcoholic Beverages Market Regulation Board, Privatization

Administration, Public Procurement Authority, Sugar Authority, the Radio and Television

Supreme Council, the Public Oversight, Accounting and Auditing Standards Authority.

 

Competition Authority

 

The Competition Authority (CA) targets to maximize the economic efficiency by establishing and

protecting the competition in the market. The main responsibilities and powers of the Authority

are as follows:

 

Carrying out examinations, inquiries and investigations into activities and official

transactions defined in the Competition Code upon application or ex officio; taking the

measures necessary to prevent infringements of the Code; and imposing administrative

regulations

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Granting exemption to and issuing related regulations for agreements which are in

conflict with competition rules but are beneficial for the economy and consumers

Preventing monopolization within the market by examining mergers, acquisitions and

joint-ventures over a certain scale

Examining the transfer of public undertakings to the private sector during the

privatization process and preventing monopolization in businesses privatized

Ensuring the dominance of competitive conditions within the markets by delivering

opinions to public bodies and entities on various acts and regulations which would

negatively affect or restrict competition in the markets

www.rekabet.gov.tr

 

Energy Market Regulatory Authority

 

The Energy Market Regulatory Authority (EMRA) regulates and supervises the energy market in

order to provide a sound, transparent and competitive market and maintain these

circumstances; provide electricity and energy sources to consumers in the most convenient way

in terms of quality, quantity, price and environmental compatibility. The main responsibilities

and powers of the Authority are as follows:

 

Granting licenses defining the authorized operations as well as resulting associated

rights and obligations of legal entities in electricity, natural gas, petroleum, and liquid

petroleum gas markets; auditing organizations engaged in aforesaid markets

Monitoring the market performance, designing related regulations and auditing the

enforcement process

Determining statutory principles of pricing

Imposing administrative sanctions, through the Electricity Market Regulation Board, in

case of  violations

www.epdk.gov.tr

 

Banking Regulation and Supervision Agency

The Banking Regulation and Supervision Agency (BRSA) protects the rights and benefits of

depositors; guarantees the trust and stability in financial markets; supports development of the

finance sector and facilitates the efficient working of the credit system. The main responsibilities

and powers of the Authority are as follows:

 

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Regulating incorporation, management, organization, share exchange and similar

procedures in banks, financial holding companies and partly in financial leasing and

factoring companies; auditing to ensure compliance with such regulations

Reducing transaction and intermediation costs for more competitive banking operations,

boosting competitiveness, activating market integration and operation, rendering the

market transparent, and ensuring that the opinions of relevant bodies are reflected into

regulations concerning financial markets

Inspecting the risk structures, internal controls, risk managements, internal audit

systems, receivables, shareholder's equities, payables, profit and loss accounts, liability

and obligation balances as well all factors having impact on the financial structures of

entities covered by the banking law for compliance with the principles of corporate

management

Evaluating the annual financial reports issued by independent audit institutions

www.bddk.org.tr

 

Capital Markets Board

The Capital Markets Board of Turkey (CMB) aims to ensure efficient and extensive involvement

of public to economic development through transforming investments into securities, and

protect the rights and benefits of investors by promoting the principles of fairness, transparency

and stability in the capital market. The main responsibilities and powers of the Authority are as

follows:

 

Making true, timely and adequate public disclosures

Determining terms and principles regulating audit and assessment processes for

institutions covered by the Capital Markets Law

Cooperating with other regulatory and audit institutions in order to meet the

requirements of the national and international legislation and to ensure financial

stability

Establishing principles relating to the certificates of educational and professional

competence for employees recruited by public limited companies and capital market

institutions and establishing training centers

Establishing rules that shall be complied with by entities that will offer investment

advice to capital market players

Defining operating principles for the Public Disclosure Platform through applications

and announcements

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Regulating IT systems of public limited companies, stock exchanges and self-regulatory

institutions

Temporarily assigning members to vacancies occurring in the board of directors of

public limited  companies

  www.spk.gov.tr

 

Information and Communication Technologies Authority

 

The Information and Communication Technologies Authority (BTK) undertakes the legal

regulation, supervision, authorization, reconciliation, and other similar functions within the

telecommunications market. The main responsibilities and powers of the Authority are as

follows:

 

Inspecting the legal compliance of networks and infrastructures, and eliminating those

which are non-conforming

Inspecting compliance with licenses, standards and legislation in the market

Carrying out dispute resolution procedures between operators when necessary, and

otherwise taking necessary measures

Defining principles and procedures to ensure equal access to telecommunication

services for consumers and end-users, and to protect their rights and benefits

Issuing and publishing national standards that should be met by any and all systems and

devices used in the telecommunications industry, and inspecting the compliance of

market to such standards

www.btk.gov.tr

 

Tobacco, Tobacco Products and Alcoholic Beverages Market Regulation Board

 

The Tobacco, Tobacco Products, and Alcoholic Beverages Market Regulation Board (TAMRB)

follows up operations relating to registration, authorization and regulatory systems in tobacco,

tobacco products, alcohol and liquor; issues regulations for avoiding medical and social harms of

tobacco and alcohol consumption, and also issues sector-specific implementing guidelines for

the enforcement of laws. The main responsibilities and powers of the Authority are as follows:

 

Regulating and supervising tobacco production, granting permissions for the import of

tobacco seeds and tobacco trade; and buying and selling tobacco products by public

procurement

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Granting necessary permissions to set up tobacco processing plants; inspecting the

operations of these plants, monitoring tobacco warehouses and storages, granting

permissions relating to tobacco warehouses

Supervising entities engaged in the market

Granting establishment, production and sales permits for tobacco production

Regulating the markets on ethyl alcohol, methanol, distilled liquors and brews; issuing

regulations to be put into force countrywide, and harmonizing them with the EU

legislation

  www.tapdk.gov.tr

 

Privatization Administration

 

As a highly important authority, distinctive from other regulatory and supervisory institutions,

the Privatization Administration (PA) is responsible for coordinating the privatization processes

in Turkey. It is an autonomous administrative organ with full responsibility for privatization

processes in the country. The main responsibilities and powers of the Administration are as

follows:

 

Presenting proposals to the Supreme Privatization Council for the inclusion of

organizations into/exclusion of organizations from the scope of privatization or

orienting the preparation of appropriate organizations toward privatization

Preparing a privatization plan for eligible organizations, and determining necessary

privatization procedures

Conducting the privatization process of organizations; guiding the organizations during

the pre-privatization process, and coordinating the operations in this field

Issuing regulations for financial, administrative and legal structures of organizations

Administering the Privatization Fund

www.oib.gov.tr

 

Public Procurement Authority

 

The Public Procurement Authority establishes the principles and procedures to be applied to

any procurement held by public authorities and institutions governed by public law or under

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public control or using public funds; coordinates the procurement of goods, services or works

financed by any resource at the disposal of the contracting authorities referred to in the law. The

main responsibilities and powers of the Authority are as follows:

 

Handling complaints claiming that the actions of the contracting authority within the

period from the commencement of the tender proceedings until the signing of the

contract are in violation of the applicable legislation

Issuing, developing and guiding the implementation of all legislation concerning the

Public Procurement Law and the Public Procurement Contracts Law as well as the

standard tender documents and contracts

Keeping the records of entities prohibited from bidding for tenders

Determining the principles and procedures with regard to tender notices, publishing the

Public Procurement Bulletin

www.ihale.gov.tr

 

Sugar Authority

 

The Sugar Authority is the institution authorized and responsible for and in charge of

establishing principles and procedures of sugar regime, sugar production, pricing and marketing

for meeting the sugar demand in the country through local production or otherwise by import.

The Authority ensures that the sugar legislation is enforced and supervises the compliance of

operations with the legislation. The Authority has the following duties and authorities through

the Sugar Board acting as its decision-making body:

Making and implementing decisions on setting, canceling and transferring quotas

Determining the participation shares of companies in the market

Making and implementing decisions on storage deductions and premiums

Evaluating market parameters and conveying to the higher body its opinions on

regulations deemed necessary

Enforcing statutory administrative sanctions

Guiding the R&D process, and allocating resources when deemed necessary

Conducting inspections at related plants

www.sekerkurumu.gov.tr

 

The Radio and Television Supreme Council

 

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The Radio and Television Supreme Council (RTSC) is responsible for regulating and supervising

radio and TV operations. License and authorization for broadcast is granted to terrestrial, digital,

satellite, cable and IPTV broadcasters by RTSC. RTSC inspects broadcasters directly or upon

viewer complaints and imposes sanctions when deemed necessary. The main responsibilities

and powers of the Authority are as follows:

 

Taking measures to secure freedom of information and building competitive

environment in the broadcast services market

Preparing  and implementing TV channel and radio frequency plans

Defining requirements for license applications by media service providers, granting

licenses to eligible entities, supervising whether eligibility is maintained and

withdrawing the licenses when necessary

Inspecting whether the broadcasts of media service providers settled in Turkey comply

with the applicable legislation and appropriate international conventions

Inspecting whether the broadcast services of media providers not settled in but subject

to the jurisdiction of Turkey comply with the applicable legislation and appropriate

international conventions

Determining principles and procedures for measuring and supervising broadcast ratings,

defining sanctions for violations

www.rtuk.org.tr

 

Public Oversight, Accounting and Auditing Standards Authority

 

The Public Oversight, Accounting and Auditing Standards Authority (POA) is established to

develop standards so as to ensure that financial reports are issued and supervised in compliance

with international standards and secure an efficient public oversight with a view to ensuring a

high quality and reliable financial reporting and independent audit environment. The main

responsibilities and powers of the Authority are as follows:

 

Establishing and issuing Turkish Accounting Standards in compliance with international

standards in order to ensure relevance, transparency, reliability, understandability and

consistency of financial statements of the parties who are liable by law to keep accounts

Establishing requirements for the setup and operation of independent auditors and audit

firms; announcing, registering and publicly disclosing eligible entities

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Supervising and overseeing the compliance of operations of independent auditors and

audit firms with the regulations; suspending or withdrawing the operating licenses in

case of any violation

Conducting the examination, authorization, registration and disciplinary investigation

process for independent auditors; establishing educational and professional ethical

standards, and taking necessary measures to remove any deficiency

Cooperating with appropriate international authorized bodies; registering foreign

auditors and audit firms authorized to perform auditing in Turkey, and making public

disclosures to this end.

6.INTELLECTUAL PROPERTY

Trademarks, designs, patents and copyright matters in Turkey are governed by the Law on

Intellectual and Artistic Works, which is enforced by Turkish judicial authorities.

The General Directorate of Copyright and Cinematography Department of the Ministry of Culture

and Tourism is in charge of the administrative side of intellectual property issues in Turkey.

Under the Turkish law, the main intellectual property rights that are capable of protection are

patents, trademarks, registered and unregistered designs, copyrights and confidential

information.

An invention is patentable if it is new, improves on the current state of the art and is capable of

industrial application. The patent protection is granted by registration with the Turkish Patent

Institute (TPI) and by Decree Law No. 551 dated 1995 Pertaining to the Protection of Patent

Rights together with its implementing regulations, Law No. 4128 dated 1995 Pertaining to the

Addition of the Penalty Provisions to the Decree Laws numbered 551, 554, 555 and 556 (Law

No. 4128) and unfair competition provisions in the Turkish Commercial Code (Law No. 6762,

published in the Official Gazette dated 9 July 1956, No.9353) (TCC). TPI grants patents either

following an in-depth examination or without examination. Patents granted without

examination are protected for seven years. Patents granted following the TPI’s examination are

protected for twenty years.

In order to be registered, a trademark must be capable of distinguishing the goods or services of

one undertaking from those of other undertakings. Goods are divided into 34 classes and

services are divided into 11 classes. The trade mark protection is granted by registration with

the TPI and by Decree Law No. 556 dated 1995 Pertaining to the Protection of Trade Marks and

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its implementing regulations, Law No. 4128 and the TCC. Registered trade marks are protected

for ten years.

In order to be registered, a design must relate to the features of the whole or part of a product,

or its ornamentation, be new, and have an individual character. The protection is granted by

registration with the TPI and by Decree Law No. 554 dated 1995 Pertaining to the Protection of

Industrial Designs and its implementing regulations, Law No. 4128 and the TCC. Designs

registered with the TPI are protected for five years.

An unregistered design is any shape or configuration determined solely by its technical function

and dictated solely to allow it to fit to another product. The protection of the unregistered design

is under the unfair competition provisions of the TCC.

Copyright is the ownership of any kind of intellectual or artistic creation bearing the

characteristics of its author. This includes the following works; scientific (including computer

programs), literary (which can also include computer programs), musical, artistic,

cinematographic. The protection subsists automatically under Law No. 5846 dated 1951 on

Intellectual and Artistic Works and Law No. 5728 dated 2008 that amends the penalty

provisions of Law No. 5846 in a way to comply with the basic criminal laws and other related

laws. The owner of a copyright has the right to process, publish, duplicate and transmit the

same. The copyrights are protected during the life time of their owners and for additional 70

years.

Confidential information includes trade secrets and inventions in enterprises. Trade secrets are

automatically protected under the unfair competition provisions of the TCC. Any other

confidential information must be protected by a confidentiality agreement. The right holder can

prevent the disclosure of the confidential information to third parties.

Turkey is a party to the following international agreements, conventions and treaties related to

intellectual property rights: Paris Convention for the Protection of Intellectual Property Rights,

the Convention Establishing WIPO, the Patent Cooperation Treaty (PCT), Strasbourg Agreement

Concerning the International Patent Classification (IPC), Protocol Relating to Madrid Agreement,

the Nice Agreement Concerning the International Classification of Goods and Services for the

Purposes of Registration of Marks, the Vienna Agreement Establishing an International

Classification of the Figurative Elements of Marks, The Hague Agreement Concerning the

International Deposit of Industrial Designs, the Locarno Agreement Establishing an International

Classification for Industrial Designs, the Trademark Law Treaty (TLT), the Budapest Agreement

on the International Recognition of the Deposit of Micro-organisms for The Purposes of Patent

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Procedure, the Convention Establishing the World Trade Organization, the European Patent

Convention and the Patent Law Treaty and Singapore Treaty on the Law of Trademarks.

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