Turkey’s Future is Bright

The world’s first ever global financial crisis that emerged in the US in the last quarter of 2008 had a negative impact on the rest of the world, including Turkey, in the couse of time. The uninterrupted, rapid growth continuing since 2002 came to a standstill in 2009. Turkey’s increasing economic integration with the rest of the world, which was one of the factors behind this rapid growth, has now ranked our country among those which have been hit hard by the global financial crisis.

On the other hand, the global crisis has not changed Turkey’s strong position in the world and region. Turkey, which has become the 17th largest economy in the world and 6th in all Europe due simply to its entrepreneurs, qualified workforceand young, dynamic populationi without using any natural resource or freign financial support, is capable of surviving this crisis.

At the IMF-World Bank annual conference held in Istanbul in October 2009, it was argued that Turkey and South Africa would both be touted among the “core countries” of the G-20 countries, along with Brazil, Russia, China and India, which would play a more active role in the world economy. At the same conference, the Managing Director of IMF, Dominique Strauss-Kahn, estimated that Turkey would record one of the highest growth rates in 2010.

Turkey stands at the geographical crossroads, connecting Europe, the Black Sea region, the Caucasus, the Central Asia and the Middle East. In short, Turkey is a bridge bringing together East with West and North with South. Being an industrial giant in the region in an area from Italy to China, Turkey holds a share of %65 in the industrial import figures of the Central Asian, Middle Eastern and South African countries combined.

Turkey’s legal framework also offers extremely attractive opportunities to investors, An entrepreneur, whether local or foreign, can establish a company in one day in Turkey. According to the World Bank’s 2009 Database on Business Creation, Turkey ranks above some countries like Czech Republic, Italy, Poland, Romania, Slovakia and Spain in this respect and also above the average of OECD 3 years prior to the global financial crisis, foreign capital inflow to Turkey was USD 50 billion. Number of foreign businesses operating in Turkey became 20 thousand.

Union of Chambers and Commodity Exchanges of Turkey, is an umbrella organization of the Turkish private sector. Its President M.Rıfat Hisarcıklıoğlu was elected Vice-President of the European Association of Chambers of Commerce and Industry (Eurochambres) on 15 October 2009. This also demonstrates the importance attached by the European business community to Turkey’s on going growth in the region.

Turkey’s Infrastructure is Strong

Turkey’s strategic location is highly appealing to investors. Turkey’s transport, communications and energy infrastructure is new and equipped with high technology. Turkey’s strategy for the energy sector is based on the goal of creating a secure environment and providing high quality services for the consumer. Turkey’s Renewable energy potential offers new, exceptional business opportunities to investors, The Law on Utilization of Renewable energy potential offers new, exceptional business opportunities to investors. The Law on Utilization of Renewable Energy Resources to Generate Electric Power in force encourages such types of investments and renders them even more attractive.

Energy Projects in Turkey

Turkey will launch a number of large-scale energy projects over the next 10 years, On the other hand, there are also many ongoing natural gas and pipeline projects, which, once completed, will supply secure energy resources to both Turkey and Europe.

Communications Infrastructure

In 2008 in Turkey, the total number of mobile phone users reached 66 million and PSTN subscribers 22 million, while the total number of Internet service users and broadband users rose to 30 million and over 6 million, respectively, according to data published by the Ministry of Transport and Communications, The communications industry in Turkey has been improved considerably in recent years folowing the privatization of a 55% of shares of Türk Telekom. The diversification of services in the communications industry via mobile phones and the Internet has created an attractive business environment for new investments.

Transport Infrastructure

The total number of air passengers in Turkey reached 80 million in 2008. Turkey has 13 international and a total of 41 airports, 64 thousand km of highway and a railway network of 11 thousand kms. The length of the high-speed rail in service will be increased to 1.211 kms very soon. The Ankara-Eskişehir section of the Ankara-Istanbul high-speed rail line is now in service. The whole project is expected to be completed soon. The total length of the high-speed rail network in the country will be doubled once the lines planned are completed.

Highly Competitive Workforce

Turkey has skilled, highly motivated and qualified workforce of 24 million, more than half of which is under the age of 30, offering highly competitive human resources. This is proven by the fact that two international automobile manufacturers operating in Turkey state that their plants in Turkey are the most productive and highest quality ones among their other plants elsewhere. Employees working in countries with which Turkey has signed bilateral social security agreements do have a right to choose whether to stay in their national social security schemes, or not.

Investment Incentives

In Turkey, the government offers a broad range of investment incentives, grants and guidance services to international investors in line with the relevant international regulations. New regulations have been introduced to offer incentives for new sector- and region-specific investments. In general both domestic and foreign investors are equally entitled to tax and non-tax incentives. This fair treatment is achieved and supported trough the Direct Foreign Investments Law.

The general investment investment incentive scheme includes mainly the folowing:

  • Incentives for investments in priority development regions,
  • Incentives for SMEs,
  • R&D incentives,
  • Incentives for exports and agricultural operations.

Special investment zones were created in order to develop an investor-friendly enviroment, providing access to state aids and well designed infrastructure.

Technology Development Zones – Technoparks

A number of Technology Development Zones (TDZ) were created in Turkey with a view top support research and development activities and encouraging investment in high technology. There are currently 18 TDZ for applied technology, and 13 others, which received official authorization and are under construction, amounting to 31 in total. There are 6 TDZ in Ankara, 3 in Istanbul and 3 in Kocaeli.

Key Advantages Offered by TDZ

  • Offices ready to rent and fully accessible infrastructure. Profits derived from software and R&D sevices are exempt from income and corporate taxes until 31 December 2013;
  • Applications software developed outside the TDZ and delivered before 31 December 2013 are exempt from VAT. Such software include system management, data  management and business application programs, as well as those developed for diverse business sectors, the Internet, mobile phones and military command control;
  • Remunerations paid to researchers and software and R&D employees employed in the TDZ are exempt from all taxes until 31 December 2013.
  • IT-specific companies are exempt from VAT in periods during which income and corporate tax returns are required to be filed.

Industrial Zones

Industrial zones are created to attract large-scale, technology-intensive investments. An investment made in an industrial zone must be engaged in the advanced technology sector and cover an investment area of at least 1.500 squarmeters. Industrial zones also offer the same advantages as those offered by Organized Industrial Zones (OIZ).

Key Advantages Offered by OIZ

Organized industrial zones function as catalyst in spreading industries over to different cities. Today, there are 140 OIZ across Turkey, housing nearly 37.000 companies. The turnaround time is significantly shorter for accessing utilities and obtaining the necessary business licenses in these OIZ, each serving as a one-stop office. The Manisa OIZ ranks among the best 10 industrial zones to invest across the world, and this shows how successful are the OIZ in Turkey.

In addition to the investment incentive scheme in Turkey (general investment incentives, large-scale investment incentives, region-and sector-specific incentivesi employment incentives, R&D incentives, etc.) investors operating in these OIZ are also offered the following key advantages:

  • VAT exemption on land acquisitions,
  • Real Estate Tax exemption for start-up companies for five years,
  • Lower water, natural gas and communications costs,
  • Tax exemption on unification/segregation of land plots (nearly 0,54% of the total cost),
  • Municipal tax exemption on plant construction and use.

Free Trade Zones Special Status

The free trade zones in Turkey are given a special status, exempting them from the customs area although they are located within the political borders of country. Free trade zones are exempt, either fully or in part, as the case may be, from Legal and administrative regulations applicable to all commercial, financial and economic activities in the customs area. There are currently 20 free trade zones in Turkey, providing easy access to international trade routes, to major domestic ports in the Mediterranean, Aegean and Black Sea regions and to the EU and Middle East markets.

Customs Regulations

Turkey joined the EU Customs Unions on 1 January 1996 and, thereafter, harmonized its customs law and regulations with the EU Customs Code. Since then, the customs regulations in Turkey have been in conformity with those of the EU, and all tariff-and non-tariff barriers for industrial and agricultural products were eliminated on both sides. Turkey imposes the EU Customs Union duties on imports from third-party countries.