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U.S. Department of State
Turkey Country Commercial Guide
Office of the Coordinator for Business Affairs
TURKEY
FY96
COUNTRY COMMERCIAL GUIDE
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
- Major Trends and Outlook
- Principal Growth Sectors
- Government Role in the Economy
- Balance of Payments Situation
- Infrastructure Situation
III. POLITICAL ENVIRONMENT
- Nature of Relationship with the United States
- Major Political Issues Affecting Business Climate
- Brief Synopsis of Political System, Schedule for
Elections and Orientation of Major Political Parties
IV. MARKETING U.S. PRODUCTS AND SERVICES
- Distribution and Sales Channels
- Use of Agents/Distributors
- Franchising
- Direct Marketing
- Joint Ventures/Licensing
- Steps to Establishing an Office
- Selling Factors/Techniques
- Advertising and Trade Promotion
- Pricing Product
- Sales Service/Customer Support
- Selling to the Government
- Protecting Your Product from IPR Infringement
- Need for a Local Attorney
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
- Best Prospects for Non-agricultural Goods
Telecommunications Equipment
Electric Power Generation Equipment
Textile Manufacturing Equipment
Medical Products
Building Products
Computer Software
Auto Parts/Services
Airport, Ground Support Equipment
Electronics Production/Test Equipment
Architecture, Construction, Engineering
Pollution Control Equipment
Food Processing & Packaging Machinery
Security Services/Equipment
Defense Industry
- Best Prospects for Agricultural Goods
- Significant Investment Opportunities
VI. TRADE REGULATIONS AND STANDARDS
- Tariffs and Import Taxes
- Customs Valuation
- Import Licenses
- Export Controls
- Import/Export Documentation
- Temporary Entry
- Labeling, Marking Requirements
- Prohibited Imports
- Standards
- Free Trade Zones/Warehouses
- Special Import Provisions
- Membership in Free Trade Arrangements
VII. INVESTMENT CLIMATE
- Openness to Foreign Investment
- Conversion and Transfer Policies
- Expropriation and Compensation
- Dispute Settlement
- Political Violence
- Performance Requirements
- Right to Private Ownership and Establishment
- Protection of Property Rights
- Regulatory System
- Bilateral Investment Agreements
- OPIC and Other Investment Insurance Programs
- Labor
- Foreign Trade Zones/Free Ports
- Capital Outflow Policy
- Major Foreign Investors
VIII. TRADE AND PROJECT FINANCING
- Description of Banking System
- Foreign Exchange Controls Affecting Trading
- General Financing Availability
- How to Finance Exports/Methods of Payment
- Types of Available Export Financing and Insurance
- Project Financing
- Lists of Banks
IX. BUSINESS TRAVEL
- Business Customs
- Travel Advisory and Visas
- Holidays
- Business Infrastructure
X. APPENDICES
APPENDIX A COUNTRY DATA
APPENDIX B DOMESTIC ECONOMY
APPENDIX C TRADE
APPENDIX D INVESTMENT STATISTICS
APPENDIX E U.S. AND COUNTRY CONTACTS
APPENDIX F MARKET RESEARCH
APPENDIX G TRADE EVENT SCHEDULE
This Country Commercial Guide (CCG) presents a comprehensive look at
Turkey's commercial environment through economic, political and market
analyses.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annually at U.S. Embassies
through the combined efforts of several U.S. Government agencies.
CHAPTER I. EXECUTIVE SUMMARY
OVERVIEW
The Turkish market offers excellent growth prospects for American
exports. Increased spending on infrastructure projects and private
sector investment will generate strong demand for a wide range of
capital goods. Turkey's young population of 60 million is rapidly
growing, both in numbers and in purchasing power. Recent export growth
underscores the agility of Turkish entrepreneurs and the geographic
advantage Turkey enjoys for sales into the European Union, Russia,
Central Asia, and Middle Eastern markets. Turkey's outstanding growth
prospects led to its designation by the U.S. Department of Commerce as
one of the world's ten Big Emerging Markets.
Turkey remains unexplored territory for most American companies outside
the Fortune 500 and defense suppliers. We hope this guide will provide
enough information to encourage your firm to increase its Turkish
marketing efforts.
SOME INTERNATIONAL COMPARISONS
U.S. trade statistics indicate that the value of U.S. exports to Turkey
in 1994 was $2.75 billion. This exceeded total American sales to such
markets as Russia ($2.6 billion), Sweden ($2.5 billion), India ($2.3
billion), and all of Eastern Europe ($2.2 billion). The value of total
Turkish import demand is on par with markets like Brazil and Indonesia
and is significantly higher than Argentina, Poland and South Africa.
EXPORT OPPORTUNITY SECTORS
Implementation of infrastructure projects will require billions of
dollars worth of power generation, telecommunications, pollution
control, medical, airport, and architecture/engineering equipment and
services. Turkish private sector growth is generating demand for
textile manufacturing, food processing and packaging, and capital goods
to boost manufacturing efficiency and product quality.
POSITIVE EFFECTS OF EU CUSTOMS UNION AGREEMENT
Turkey is slated to enter into a customs union agreement with the
European Union on January 1, 1996. (The European Parliament is
scheduled to vote on this later this year.) Successful conclusion of
this agreement will spur private investment as the outline of Turkey's
economic future becomes clearer and local firms gear up to meet the
increased competition in the domestic market and take advantage of the
new export opportunities. Turkey will phase out non-tariff import fees
(e.g., the Mass Housing Fund contribution) and reduce its import duties
to the level of the EU common external tariff (once the Uruguay Round
tariff reductions are phased in, Turkish duties on U.S. goods will
average only about 2 percent). This will translate into a major
reduction in the cost of imported products for local consumers.
EMBASSY BEM STRATEGY FOR TURKEY
In the coming months, the U.S. Embassy in Turkey will focus its export
promotional efforts on:
(a) concluding several build-operate-transfer power generation
projects, which will generate hundreds of millions of dollars worth of
U.S. exports of equipment and services;
(b) privatization opportunities in the telecommunications sector,
including operating license competitions in cellular, paging, data
transmission, public phones, directory services, and cable television;
(c) identifying environmental infrastructure project opportunities with
viable sources of implementation finance; and
(d) supporting U.S. interests involved in developing a southern
pipeline route to transport Caspian Basin oil, a project valued at an
estimated three billion dollars.
REGIONAL MARKET SPRINGBOARD
Turkey retains its historic role as land bridge between Europe and Asia.
Moreover, trade with Russia has mushroomed in recent years with Turkish
annual exports to Russia estimated at $1-3 billion. Turkey has also
pursued market opportunities in the newly independent states of Central
Asia and the Caucasus. Turkish construction firms are very active in
these markets as well as more traditional ones in the Middle East and
North Africa. U.S. firms can work with Turkish firms for product
distribution into regional markets and joint-ventures to compete for
regional project opportunities with Turkish firms supplying construction
services.
MARKET PENETRATION STRATEGY SUGGESTIONS
After reading this and other market data available in the United States,
we suggest you visit Turkey for face-to-face meetings with potential
clients and representatives. Istanbul is the country's commercial
center, followed by Izmir and Adana, with the capital Ankara a necessary
stop for those pursuing government-sponsored infrastructure projects.
The U.S. Foreign Commercial Service offers its Gold Key program to
arranged custom-tailored appointment programs with appropriate Turkish
firms. Other Commerce Department programs that may meet your marketing
needs are the Agent/Distributor Service and the Customized Market
Analysis programs. (Contact your nearest U.S. Department of Commerce
Export Assistance Center or Commercial Service Office for more details
of these and other services of potential assistance for American
exporters.)
BOTTOM LINE
The Turkish market offers strong growth prospects for American
exporters. Its demographics, massive infrastructure requirements,
dynamic private sector, regional export opportunities and expected
intensification of liberal economic policies validate its designation as
one of the world's ten "Big Emerging Markets." Is your company
positioned to profitably participate in this growth market?
Country Commercial Guides are available on the National Trade Data Bank
on CD-ROM or through the Internet. Please contact Stat-USA at 1-800-
Stat-USA for more information. To locate Country Commercial Guides via
the Internet, please use the following Worldwide Web address: WWW.STAT-
USA.GOV. CCGs can also be ordered in hard copy or on diskette from the
National Technical Information Service (NTIS) at 1-800-553-NTIS.
CHAPTER II. ECONOMIC TRENDS AND OUTLOOK
MAJOR TRENDS AND OUTLOOK
From establishment of the republic until the early 1980s, Turkey was an
insulated, state-directed economy. In the 1980s, however, the country
began an economic turnaround based on increased reliance on market
forces, export-led development, lower taxes, integration with the world
economy, and privatization. These reforms brought Turkey impressive
benefits: average annual growth rates over the past decade were the
highest of any OECD country.
Turkey's leadership, however, left the reform program unfinished.
Turkey's perennial economic problems -- large public sector deficits and
resulting high inflation -- continued to worsen even as the economy
recorded impressive gains. Because of these imbalances and Turkey's
ballooning current account deficit, Moody's downgraded Turkey's credit
rating from BAA3 to BA1 in January 1994. This sparked a run on the
Turkish Lira and sent the economy into a tailspin. The introduction of
a much-needed austerity and stabilization program in April 1994 further
cooled down the economy. The "April 5 Program" formed the basis of an
stand-by agreement between Turkey and the International Monetary Fund
which was approved in July.
Turkey weathered the 1994 crisis, although at a great cost to the
economy. GNP fell 6 percent, setting a post-war record. Unemployment
jumped and real wages fell. Both the private and public sectors put
investments on hold. Although inflation slowed following implementation
of the program, it rebounded later in the year and set a new record. On
the positive side, the currency depreciation boosted exports and
produced a healthy current account surplus. Turkey had no problem
meeting its substantial foreign debt payments last year, although at the
cost of a spiraling domestic debt burden.
The Turkish Government has had only partial success implementing the
program's structural reform measures. Steps such as privatization of
money-losing state enterprises, improved efficiency of tax collection,
and streamlining of the social security system are essential to remove
pressure on the state budget and promote stable and sustainable growth.
Late last year Prime Minister Ciller won approval of a new privatization
law. Implementation, however, has been slow.
Turkey's economy is showing signs of recovery in 1995. Driven by a
dynamic private sector and the prospect of a customs union with the
European Union (EU) next year, Turkey's long-term potential is bright.
The fundamentals that made Turkey the fastest-growing country in the
OECD during the 1980s have not changed and have even improved in many
respects.
Economic Growth. Turkey's GNP has grown at an average annual rate of
4.5 percent since 1981, although there have been large swings around
this mean. Growth reached 8.1 percent in 1993, due in large part to a
high rate of consumption resulting from lax monetary and fiscal
policies. 1994's economic crisis and austerity program brought to an
end 13 straight years of growth. The 6 percent decline recorded in GNP
last year set a post-war record for Turkey. GNP in 1994 totaled $133
billion. With recovery underway, most analysts expect positive GNP
growth this year. The Turkish Government's official target is 3.1
percent growth.
Agriculture accounted for 16 percent of GNP in 1994, and its output was
essentially unchanged from 1993. Industry, responsible for 26 percent
of GNP, was down 5.7 percent for the year. Manufacturing sector output
fell by 8 percent, mining output rose by 8 percent, and energy output
was up 3 percent. Services accounted for 45 percent of GNP and were
down 4 percent in 1994.
Consumption and Investment. Private final consumption, which accounted
for 69 percent of gross domestic product (GDP) in 1994, fell 5 percent
in real terms over the previous year. Consumption of durable goods
dropped 29 percent. Government final consumption, accounting for 8
percent of GDP, fell by 4 percent last year.
Gross fixed capital formation, accounting for 27 percent of GDP, fell by
16 percent last year. Of this, private sector investment, which
accounted for nearly four-fifths of the total, was down 9 percent.
Public sector investment fell by 35 percent.
Although no data are yet available on consumption and investment in
1995, both are likely to post some improvement as the economy recovers
from 1994's recession.
Inflation, Wages, and Monetary Policy. In spite of efforts undertaken
under the April 1994 reform program, Turkey's principal economic problem
remains inflation, fueled primarily by large public sector deficits.
Annual consumer price inflation has averaged 74 percent since prices
began to escalate in 1988; wholesale price inflation has averaged 70
percent.
Inflation in 1994 soared to record levels, due mainly to huge one-time
increases in state-administered prices as part of the April reform
program. Although monthly price increases during the summer months
indicated that the government's anti-inflationary policies were having
some impact, inflation accelerated in the fall. For the year as a whole
consumer prices rose 126 percent, versus a 71 percent rise recorded in
1993; wholesale prices rose 149 percent, following 1993's 60 percent
rise. Part of the blame for the resurgence of inflation lies in cost
pressures, particularly in the agricultural sector. More important,
however, were high inflationary expectations on the part of producers
and investors, stemming from the government's inability to follow
through with the structural reform measures promised in the April 5
program.
As the sharp price increases recorded last April and May have dropped
out of the calculations, annual inflation rates have dropped
significantly. Consumer prices in the twelve months through May 1995
were up 82 percent; wholesale prices in the same period by 78 percent.
The government promises that this return to "normal" levels of inflation
is not sufficient. Its target for annual inflation in December is
around 40 percent, although most observers find this overly optimistic.
Throughout most of the 1980s wages failed to keep pace with inflation,
resulting in real declines in workers' income. Beginning in 1989,
however, real wages began to increase substantially, rising some 30
percent in 1993 alone. These increases -- which were not backed up by
productivity improvements -- contributed to the economic imbalance which
triggered 1994's economic crisis. Real wages dropped substantially in
1994, as pay increases for civil servants were well below inflation.
Wages in the manufacturing sector fell by 52 percent in U.S. dollar
terms between September 1993 and September 1994, reaching $1.12 per
hour.
The Central Bank's ability to design and implement a coherent monetary
policy has been severely constrained by its role in financing the
government's perennial budget deficits through money creation. Until
1994, the Bank tried to "smooth out" changes in domestic interest rates
and the foreign exchange rate of the Turkish Lira. With the onset of
the economic crisis in January 1994, the Bank shifted to a policy of
trying to control the devaluation of the Lira using overnight interest
rates as a tool. Under the terms of the IMF agreement, the government
agreed to limit recourse to the Central Bank for financing the deficit.
The government has also taken steps toward increasing the independence
of the Central Bank.
PRINCIPAL GROWTH SECTORS
Energy. Electrical energy demand in Turkey is growing by approximately
eight percent a year. By the year 2000 electrical energy demand is
projected to reach 130 billion kWh, more than double consumption in
1993. Even if all the current hydroelectric potential (120 billion kWh)
can be used, total output will be far from sufficient to meet
anticipated requirements by the year 2000.
Telecommunications. In 1993 Turkey had a telephone exchange main line
capacity of approximately 12.7 million and telephone subscriber density
of 21 lines per 100 persons. By the year 2002, Turkey aims to increase
its subscriber line capacity to 20 million, and increase the telephone
line density to 25 per 100 persons. They also expect the system will be
80 percent digital by that point.
Environment. With the establishment of a Ministry of Environment in
1991, environmental issues have won increased prominence. New
regulations regarding sewage, medical waste and power plant emissions,
among others, will add to the growth of this sector.
Transport. The Turkish Government gives a special priority to the major
infrastructure projects especially in the transport sector. Although
most state investments were put on hold in 1994, the government earlier
this year announced the resumption of planning for many airport, port
and highways projects.
Textiles. The textile sector is Turkey's largest manufacturing
industry, and its largest export sector. Sales in its most important
market, Western Europe, have been limited by quotas. These restrictions
are to be removed under the customs union scheduled to come into effect
next year. The global phase-out of textile quotas called for in the
Uruguay Round also increases this sector's potential. Significant
expansion and modernization projects are already underway.
Other principal growth sectors are tourism, automobiles and electronics.
GOVERNMENT ROLE IN THE ECONOMY
A serious imbalance between government revenues and spending is the root
cause of Turkey's inflation problem. Addressing this imbalance was the
fundamental aim of the April 5 program. Total public sector borrowing
requirements (PSBR) reached nearly 12 percent of GNP in 1993. New taxes
and sharp cuts in state expenditures combined to bring this figure down
to nearly 8 percent in 1994. The government's target for 1995 is 5.6
percent.
To bring about a sustainable drop in the PSBR, the Turkish Government
needs to implement the structural reform measures called for in the
April 5 program and the IMF agreement. These measures are likewise
essential to the government's stated aim of making Turkey's economy more
efficient and better able to compete in the EU customs union. These
reform steps include:
-- Privatization or closure of Turkey's inefficient state economic
enterprises (SEEs). Although the burden of the SEEs declined slightly
last year -- the borrowing requirement for SEEs was 2.2 percent of GNP
in 1994, versus 2.5 percent the previous year -- there was little
progress on privatization. After months of debate, the government
succeeded in winning Parliament's approval of a new privatization law
last November. Amid charges of political maneuvering and mismanagement,
revenues from sales concluded under the new law total less than $100
million, well below projections. Turkey's Privatization Administration
recently revised its $5 billion revenue target for 1995 to $2.7 billion.
Since Turkey first began selling state firms in the early 1980's,
revenues total only around $2.4 billion.
-- Improvement of tax administration. Tax evasion is rampant in Turkey.
The government admits that around one-quarter of total taxes are
uncollected; this figure is probably conservative. Turkey's tax
revenues equal about 22 percent of GNP, well below the OECD average of
39 percent. Overhaul of the tax system is a top priority of the
government. The World Bank is preparing a multi-year project to assist
with the effort.
-- Reform of social security and subsidy programs. Turkey's three
separate social security systems, with their low retirement ages and
inefficient operations, are a substantial drain on the Treasury. The
government is preparing legislation to merge the systems, raise the
retirement age, and modernize operations. However the subject remains
controversial. The government is in the process of reforming its
subsidy and incentive programs. Incentives for investment and export
have been revamped in line with OECD and EU guidelines. In the IMF
agreement the government promised to limit its costly agriculture
subsidy programs. High world prices last year helped keep payments
down. However, Turkey's powerful agriculture lobby will make it
difficult for the government to abandon these programs.
BALANCE OF PAYMENTS SITUATION
Trade. Turkey's huge current account deficit in 1993 -- topping $6
billion, more than six times higher than the previous year -- was one of
the main causes of the instability which precipitated last year's
economic crisis. A $14 billion trade deficit was the main culprit.
Imports exploded in 1993 due to an extremely high rate of domestic
consumption, together with the Central Bank's "strong lira" policy that
made imports progressively cheaper.
The sharp devaluation of the lira in 1994 reversed this situation. The
lira depreciated by about 18 percent in real terms last year. This,
combined with a drop in domestic demand, helped Turkey significantly
narrow its trade deficit: imports last year fell by 21 percent, exports
rose 18 percent, and the trade deficit dropped to $5 billion. Receipts
from foreign tourism also increased last year by about 10 percent. As a
result the current account rebounded, ending the year with a $2.6
billion surplus.
This year the government has returned to a "strong lira" policy, hoping
that some appreciation of the lira will hold down inflation. Imports
are growing again: they were up 16 percent in the first quarter of
1995, with exports up 24 percent. The government's policy is drawing
the ire of exporters, who fear that their international competitiveness
is being eroded.
In 1994, investment goods accounted for 30 percent of total imports,
consumer goods 12 percent, and raw materials 58 percent. The most
important import sectors were machinery, iron & steel, electrical
equipment, crude oil, and motor vehicles. Turkey's largest source of
imports was Germany, which accounted for 16 percent of total imports,
followed by the United States ($2.4 billion in imports, accounting for
10 percent of the total), Italy, France, and Japan.
Industrial products made up 85 percent of Turkey's exports in 1994,
followed by agricultural products with 14 percent, and mining and
minerals with 2 percent. The largest single export sector is apparel,
accounting for 25 percent of total exports, followed by iron & steel,
with 13 percent, and other textile products, with 12 percent. Turkey's
main export markets were Germany, taking 22 percent, the United States,
taking $1.5 billion in exports that accounted for 8 percent of the
total, the United Kingdom, France, and Italy.
Foreign Debt. At the end of 1994, Turkey's total outstanding external
debt amounted to $65.6 billion, down 3 percent from 1993. Of this
total, about 18 percent is short-term debt, and the remainder is medium-
and long-term debt. Debt service payments for the medium- and long-term
debt amounted to $8.7 billion in 1994. In spite of last year's crisis
and Turkey's subsequent inability to borrow on foreign markets, Turkey
had no difficulty servicing its foreign debt in 1994. Payments in 1995
will exceed $10 billion.
Foreign Exchange Policy. The Turkish Lira (TL) has been fully
convertible since 1990. For the most part exchange rates are determined
by the market. The Central Bank often intervenes to dampen short-term
fluctuations. From 1989 to January 1994 the government pursued a
"strong lira" policy which generally kept the rate of depreciation of
the lira below inflation. In 1993 the TL appreciated about 2 percent
against the U.S. dollar in real terms. In response to last year's
financial crisis the government abandoned this policy. The TL's value
against the dollar fell by about 18 percent in real terms last year.
Since late last year the government has again been using a "strong lira"
policy as a means to control inflation. In the first five months of
1995 the TL's value against the dollar slid only 10 percent, compared
with an increase of about 30 percent in consumer prices.
International Economic Relations. On March 6, 1995, Turkey and the EU
concluded an agreement to form a customs union from January 1, 1996.
The agreement covers industrial and processed agricultural goods.
Turkey is now in the process of harmonizing its laws and regulations
with EU standards. The two sides will meet in October to review
progress toward meeting the criteria set out in the agreement. The
European Parliament must also approve the agreement.
When the agreement takes effect the two sides will remove all tariffs
and barriers on trade in industrial goods between them. Turkey will
also adopt the EU's Common External Tariff, resulting in lower duty
rates for third countries, like the United States. Turkey is in the
process of phasing out its Mass Housing Fund surcharge levied on all
imports.
Turkey is a member of the World Trade Organization (WTO). It signed a
free trade agreement with the European Free Trade Association (EFTA) in
1991; it is negotiating free trade agreements with Israel and several
Central European countries. In 1992 Turkey and ten other regional
nations formed the Black Sea Economic Cooperation organization; it is
not yet clear what effect this organization will have on trade and
business.
Due to proximity and linguistic and ethnic ties, the Turkish Government
and businesses have continued to develop links to many of the Central
Asian and Caucasian republics of the former Soviet Union. The Turkish
government has stated that it would like to see the establishment of
joint ventures between Turkish and foreign firms to further tap the
potential of the emerging Central Asian markets.
INFRASTRUCTURE SITUATION
Airports. Major international gateway cities are Istanbul, Izmir and
Ankara. There are 22 public airports, including five international
ones. Several modernization and expansion projects are on the drawing
board. Turkish Airlines (THY) and several private firms operate
extensively on domestic lines. Major international airlines serving
Turkey include THY, Delta, Lufthansa, Air France, Swissair and British
Airways.
Ports. Turkey currently has 21 international ports, which in 1992 were
capable of handling an estimated 100 million tons of cargo and some
400,000 containers. Major cargo ports are Istanbul, Izmir and Mersin.
Expansion of the port in Izmir is proposed.
Railways. Turkey has about 8,400 kms of railway running from its most
western point to its eastern borders. Turkish Railways (TCDD) operates
a medium-speed, freight railway system used primarily to transport
minerals and bulk commodities.
Highways. The highway transport system is predominant in both internal
and external transport in Turkey. Asphalt highways comprise approx.
60,000 km of which approx. 1000 km are motorways--the rest are two-lane
highways. There is a major toll motorway, largely completed, between
Ankara and Istanbul. Other motorways are under construction. In
Turkey, approx. 85 percent of freight and 94 percent of passenger
traffic is carried by road. 50 percent of motor vehicles traveling on
Turkish highways are classified as trucks. There are numerous private
transport firms.
Courier Services. Major international courier firms operating in Turkey
include DHL, Federal Express (TNT), UPS and Air Express International.
CHAPTER III: POLITICAL ENVIRONMENT
NATURE OF RELATIONSHIP WITH THE UNITED STATES
U.S.-Turkish relations have greatly expanded in recent years. Turkey's
assistance in the Gulf war helped its public recognition in the U.S.
The U.S. and Turkey are seeking to broaden their bilateral relationship
by exploring new areas of potential cooperation through expanded
economic and trade cooperation and increased high-level political
consultation.
The bilateral security relationship remains important. U.S. military
aid to Turkey of approximately U.S. $350 million annually is one
concrete example of this fact. At the same time, the U.S. is in the
process of reducing its military presence in Europe, and Turkey is no
exception. Military presence has been scaled back significantly since
the Cold War, with more than half a dozen bases in Turkey closing since
1991. The largest remaining group of U.S. forces in Turkey is at the
air base in Incirlik, which is near Adana, where U.S. aircraft train for
NATO missions and where Provide Comfort II Combined Task Force
Headquarters is located. The U.S. has also worked with Turkish forces
in peacekeeping operations in Somalia and Bosnia under the auspices of
the U.N.
The U.S.-Turkish Joint Economic Commission is an effort to expand areas
of cooperation with Turkey beyond the traditional military spectrum.
The first meeting of the JEC in many years was held in Ankara in
December 1993, with a second meeting in March 1995 in Washington. The
meeting focused on trade investment and cooperation in other areas, such
as environment.
MAJOR POLITICAL ISSUES AFFECTING THE BUSINESS CLIMATE
The Kurdistan Workers' Party (PKK), recognized by the U.S. as a
terrorist organization, is a threat primarily in Southeastern Turkey,
although the PKK has planted several bombs in the urbanized west and
Aegean resorts to harm the Turkish tourism industry. For the past
eleven years, the PKK, by using terrorist attacks as one of its
principle tools, has sought to establish an independent Kurdish state in
Southeastern Turkey. The PKK targets Turkish security forces, state
facilities and infrastructure, and those who support the government's
efforts against the PKK. The government currently is engaged in a large
counter-insurgency operation in Turkey's Southeast region, and has met
with success in returning a sense of security to the region's urban
areas.
SYNOPSIS OF POLITICAL SYSTEM
Political System. The Turkish political system, as defined by the 1982
Constitution, is a secular, parliamentary democracy with executive,
legislative, and judicial branches. The executive branch includes a
President, who serves as chief of state, the Prime Minister as head of
government, and the Council of Ministers (or Cabinet). The President,
who has broad powers of appointment and supervision, is chosen by the
Parliament for a term of seven years, and cannot be reelected.
President Süleyman Demirel was elected in May 1993. The President
functions in a non-partisan role; whereas the Prime Minister is
generally the chairman of the political party with the largest number of
Parliamentary seats. The Prime Minister administers the government; the
Prime Minister and Council of Ministers are responsible to Parliament.
The legislative branch of the government, consisting of 450 deputies
elected in national elections at least every five years, is the Turkish
Grand National Assembly (TGNA). Elections are by proportional
representation and there is double threshold mechanism. To participate
in the distribution of seats, a party must obtain at least 10 percent of
the votes cast at the national level as well as a percentage of votes in
the contested district. The judicial system consists of a
constitutional court, a series of state courts that consider terrorist
crimes, a council of state, and a high council of judges and
prosecutors.
Elections. National elections, in which the Parliamentary deputies and
prime minister are elected, are held at least every five years. The
last national elections were held in October 1991. The next national
elections must be held no later than the fall of 1996.
Local elections are held every five years. The most recent municipal
elections were held on March 27, 1994; the next are scheduled for spring
1999.
OVERVIEW OF POLITICAL PARTIES
Center-Right. The senior coalition party True Path Party (DYP) and
opposition Motherland Party (ANAP) are both center-right parties,
sharing similar ideologies. The DYP, formed in 1983, was founded in the
tradition of the defunct Justice Party of Süleyman Demirel: a
heterogeneous, conservative mass party, tolerant of religious belief,
and supportive of the peasantry as well as free trade. The DYP
traditionally has been strongest in the rural areas of central Anatolia,
and currently holds 182 seats in Parliament. It is led by Prime
Minister Tansu Çiller, Turkey's first female Prime Minister. ANAP, also
founded in 1983 by former president Turgut Özal, holds 95 seats in
Parliament. Mesut Yilmaz is ANAP's Chairman.
Center-Left. In March 1995, the Social Democratic Populist Party (SHP)
merged with Republican People's Party (CHP). The party's Chairman is
Deputy Prime Minister Hikmet Çetin. The original CHP was established by
Mustafa Kemal Atatürk. The party currently holds 64 seats in
Parliament. The Democratic Left Party (DSP), led by former Prime
Minister Bülent Ecevit, was established in 1985. It has 10 seats in
Parliament.
Far Right. The Islamist Refah (Welfare) Party, was founded in 1983 by
Necmettin Erbakan, who continues to hold the position of Chairman. The
party promotes Islamic values and holds 38 seats in Parliament. The
Nationalist Movement Party (MHP), founded in 1983 by Alparslan Türke_,
promotes Turkish nationalism and has Pan-Turkish roots.
The newest mainstream party, the New Democracy Movement (YDH), started
as an idealist movement, but was officially declared a political party
on December 22, 1994. Istanbul businessman Cem Boyner is its leader.
Fifteen or more other smaller parties also exist.
CHAPTER IV. MARKETING U.S. PRODUCTS AND SERVICES
DISTRIBUTION AND SALES CHANNELS
Marketing of most foreign products in Turkey is through foreign
suppliers' agents or distributors. Depending on the location of the
products' consumers/end-users, most distributors have a dealer network
throughout the country or in areas where the product is most used.
Commission agents, on the other hand, periodically visit their customers
together with their foreign principals to maintain strong personal
contact, a very important marketing tool in Turkey.
USE OF AGENTS/DISTRIBUTORS: FINDING A PARTNER
Unless a U.S. firm's interests are large enough to warrant opening an
office in the country, the most effective means of selling in Turkey is
through a reliable and qualified local representative. Personal contact
is extremely important in Turkish business in both private and public
sectors. When dealing with government tenders, an agent is an absolute
necessity in view of complicated bureaucratic procedures and the
language barrier.
A U.S. firm must carefully investigate the reputation and possible
conflicting interest of any prospective agents before signing
agreements. Agency agreements under Turkish law are private contracts
between two parties and their stipulations vary according to mutual
consent. There are no fixed commission rates. It is strongly
recommended that sole agents/distributors be appointed, either for the
whole country or for specifically designated areas or types of business.
In cases where a large volume of government business is expected, it is
essential either to appoint an Ankara firm or an Istanbul firm with a
branch office in the capital.
USFCS/Turkey, through its three Turkish offices, provides a Gold Key
service to arrange custom-tailored appointment programs for visiting
American business visitors. The Commerce Department's Agent/Distributor
Service is another option for U.S. companies wishing assistance to enter
the Turkish market.
FRANCHISING
Since 1986 when McDonald's entered Turkey as the country's very first
franchise operation, the sector has grown and diversified significantly,
extending into smaller towns from urban centers. The Turkish National
Franchising Association--Ulusal Franchising Dernegi--(UFRAD) which is a
sister member of the International Franchising Association (IFA) acts as
a meeting point for prospective franchisors and franchisees. Foreign
franchises in Turkey are concentrated in fast foods and apparel; other
areas are increasingly represented as well.
In terms of a legal framework, franchising is considered in the same
category as foreign investment. The government agency responsible for
reviewing foreign franchise transactions is the Foreign Capital General
Directorate of the Undersecretariat for Foreign Trade (UFT). Foreign
franchise proposals are generally favorably received by UFT in view of
their potential for employment opportunities, transfer of technology and
know-how, and the positive effects of their competition/role modeling on
local quality standards.
The laws that apply are the Foreign Capital Incentive Law 6224
(promulgated in 1984) and Decree No. 86/10353 dated February 1, 1986,
with its communique No. I. These regulations stipulate that an
applicant provide the UFT with:
-the draft of the master franchise agreement;
-documents confirming the existence of the physical facilities for the
franchise operation;
-a feasibility report;
-information on the foreign entity making the application (sales volume,
assets etc.); and
-documentation of the product or service's patent (if it is patented).
After the approval of the master franchise agreement by the
Undersecretariat for Foreign Trade, royalty revenue can be transferred
abroad after ten percent tax deduction.
Contacts for various aspects of franchising are:
National Franchising Association
(Ulusal Franchising Dernegi--UFRAD)
Istiklal Caddesi 65, Emgen Han
80060 Beyoglu, Istanbul, Turkey
Tel/Fax: (90-212) 252-5561
Contact: Mr. Aydin Turkmen, President
Undersecretariat for Foreign Trade
Directorate General of Foreign Investment
Eskisehir Yolu, Inonu Bulvari
Emek Mevkii, Ankara, Turkey
Tel: (90-312) 212-8800 (SW)
(90-312) 212-8414 or 212-8915
Fax: (90-312) 212-8916
Finally, the International Franchising Association in Washington, D.C.
(1350 New York Avenue, N.W. Washington, D.C. 20005-4709, tel. 202-628-
8000; fax: 202-628-0812), has been active in Turkey, organizing visits
to Turkey by potential U.S. franchisors and cooperating with UFRAD in
putting them in contact with potential local franchisees.
Most U.S. accounting/auditing/consultancy firms, many U.S. banks, and
four U.S. law firms also have offices in Turkey.
DIRECT MARKETING
Unless a U.S. firm has established an office in Turkey, direct marketing
from the U.S. without an agent is not recommended. In fact, it is
virtually impossible to surmount complicated bureaucratic requirements,
language obstacles and purchasing transactions without a competent local
agent. Especially for those firms whose sales potential is large enough
to warrant it, a local affiliate is the best possible way of selling to
this market without an agent or distributor.
JOINT VENTURES/LICENSING
Most U.S. investment in Turkey is in the form of joint-venture/licensing
operations. Basic infrastructure for a specific industry usually exists
within the operation of the potential local licensee or joint-venture
partner who also has easy access to the market. The U.S. firm brings
the required advanced technology or know-how. Most Turkish companies
prefer to establish joint ventures with U.S. suppliers to overcome
shipping costs and European competition. Especially in view of higher
customs taxes applied to U.S. products vis-a-vis European-origin goods
(Turkey adopted the EU's common external tariff in 1995), local
production is usually one way a U.S. firm can profitably penetrate the
Turkish market. Law No. 6224 and Decree No. 86/10353 govern joint
ventures/licensing as well as direct foreign investment in the country.
The government authority in charge is the Undersecretariat for Foreign
Trade, General Directorate of Foreign Investment. Especially in large
urban centers, a highly sophisticated infrastructure exists in terms of
legal support, as well as financial or consultancy services which may be
required by potential foreign investors or joint venture partners.
Major U.S. accounting/auditing firms, law firms and banks have
established branches in Turkey.
STEPS TO ESTABLISHING AN OFFICE
Foreign investment and the establishment of offices in Turkey are
governed by Foreign Investment Law number 6224 (dated January 18, 1954--
published in the Official Gazette on January 24, 1954) - "The Law
Concerning the Encouragement of Foreign Capital," and the "Foreign
Capital Framework Decree" number 92/2789 (dated March 4, 1992--published
in the Official Gazette on March 20, 1992). Under these regulations,
foreigners may invest in Turkey, engage in commercial activities,
participate in partnerships, purchase shares, open branch offices, and
establish liaison offices. The General Directorate of Foreign
Investment (GDFI) of the Undersecretariat for Foreign Trade (UFT) is
responsible for implementing foreign investment regulations.
A foreign company is free to choose between a corporation (Anonim
Sirket--A.S., or "Societe Anonyme" type corporation), private limited
company (limited liability company), or branch office as the form for
its operations in Turkey. The A.S. form is more suitable for larger
projects, since corporations can attract a large number of shareholders
and are preferred by banks for credit purposes. The limited company
form is more convenient for sales and distribution enterprises.
Company formation: Application for the establishment of a new company,
opening a branch office, or initiating participation in an existing
company is made to the GDFI in writing. The investment law requires
that each partner invest a minimum of $50,000. This may be in cash or
in kind. After the permission is granted, the foreign investor can form
his or her company or branch office or begin participation in an
existing company.
Liaison Offices: Application to establish a liaison office is also made
to the GDFI in writing. A liaison office cannot engage in any activity
in Turkey which generates revenue. The expenditures of a liaison office
must be met entirely from foreign currency brought in from abroad.
USFCS suggests that a lawyer be retained for fuller detail and to handle
the application process and entity formation.
SELLING FACTORS/TECHNIQUES
Once a U.S. firm appoints an agent, the agent or distributor expects--
and should receive--the principal's full support in regard to
literature, technical information and advertisement material. Possible
government buyers and potential private-sector importers should receive
catalogs and other literature clearly indicating the name and address of
the local agents/distributors. A common and very effective support
practice by European principals is to invite the agent to the
principal's country every year for an annual sales meeting. Both agents
and, if possible, their principals, should periodically visit existing
and potential customers since personal contact in Turkey cannot be
emphasized enough.
Especially in larger Turkish cities, international trade promotional
events such as fairs, exhibits, and seminars are a common method of
sales promotion. These fairs are also opportunities for U.S. companies
to assess (and meet) existing competition, since all major foreign and
local suppliers participate in such events. The catalogs of the events
serve as 'trade lists' on a specific product categories. Currently,
there are about fifty international fair and exhibit organizers in
Turkey.
USFCS/Turkey has been promoting attendance by prospective Turkish buyers
at exhibits in the U.S. Turkish visitors to those fairs return highly
impressed by the U.S. products. U.S. firms with prospects of large
'package' sales could consider inviting some buyers to these events.
ADVERTISING AND TRADE PROMOTION (INCLUDING LISTING OF MAJOR NEWSPAPERS
AND BUSINESS JOURNALS)
Chambers of commerce and industry, various associations, and specific
sectoral publications serve as potential channels for advertisement. TV
commercials or ads in major newspapers are also highly effective. In
Turkey there are approximately ten major TV channels. Major newspapers
are Cumhuriyet, Hurriyet, Milliyet and Sabah all of which have their
headquarters in Istanbul with branch offices in Ankara. The country's
foremost commercial/economic daily newspaper is Dunya. Major weekly
periodicals are: Anba Haber (economy), Barometre (economy), Detay
(economy--also publishes tenders on equipment procurement and
infrastructure projects), and Eba Newsletter (economy/English daily)
Tebanews (weekly magazine-in English-on tenders, investment projects and
economy). There are many periodicals issued monthly. The most
important publications in this category are: Bilgisayar (computer and
related equipment), Bilisim (computer and related equipment), Dunya
Insaat (construction machinery), Finans Dunyasi (finance and economy),
Turkey (economy), Travel Tour News (tourism), and Yazilim and Donanim
(Software).
PRICING PRODUCT
Price is the most important consideration in government tenders.
Private sector buyers emphasize quality, but they are also affected by
price and financing arrangements offered by most European companies.
U.S. firms are, therefore, advised to keep their prices as low as
possible and consider alternative payment methods until their quality is
firmly established in the market.
SALES SERVICE/CUSTOMER SUPPORT
Local agents/distributors of U.S. suppliers should have the required
service and maintenance ability. Through personal contact the potential
customer should be convinced about this ability. It is a further
advantage if the U.S. firm has established its own office in Turkey and
has servicing facilities throughout the country's major centers.
SELLING TO THE GOVERNMENT
The Turkish Government Procurement System is often frustrating and
inconsistent, but it does not discriminate against U.S. suppliers who
succeed in winning a large number of international tenders. The main
law which administers government procurement is the State Procurement
Law No. 2886 (dated September 8, 1983). This law covers the agencies
which have budgets allocated to them from the central budget. In
Turkey, many state-owned corporations (the state economic enterprises--
SEE's) generate revenues through sales of raw materials, semi-finished
and finished products and services. Each of these has its own
procurement rules and regulations in its operating charter. These
regulations are much more flexible than Law No. 2886 since these SEEs
operate as quasi-private sector companies. In terms of financial
obligations and practices, their procurement regulations are largely
based upon a government decree called "the Decree on the Operations of
the State Economic Enterprises" no. 233 (dated June 8, 1984), Turkey's
Law of Obligations No. 818 (dated April 22, 1926), and the Turkish
Commercial Code No. 6762 (dated June 29, 1956). Other exceptions are
the Undersecretariat of Defense Industries (SSM) and Ministry of
National Defense. SSM procurement is financed off-budget, through
special taxes, and is not subject to Law 2886.
Price, quality and financial credit terms and length of repayment period
are the most important factors in purchasing decisions. Other factors
which affect sourcing decisions are the suppliers' reputation, the
reputation of their products for quality and reliability, and previous
experience in dealing with suppliers.
In government tenders, state organizations give particular importance to
the way proposals are prepared and to their adherence to administrative
and technical specifications. Generally, the validity of the proposal
must be three to six months from the bid date and the same validity is
to be given for the bid bond. (A bid bond is required, so that the
bidder later on does not retract his offer. If he does, the bid bond is
forfeited.) The bid bond is usually obtained from the actual supplier
for three percent of the bid amount. The performance bond is usually
six percent of the contract amount and is valid throughout the delivery
or final acceptance beginning from the contract date. All bonds have to
be counter-guaranteed by a Turkish national bank.
BOT (build-operate-transfer) investments are nowadays the preferred
procurement method by the Turkish Government especially in power,
airport and port projects. The concept involves offering foreign
companies the opportunity to participate as investors in the large
infrastructural projects. The underlying formula is that parties
interested in contracting, engineering or other aspects of a major
project should come in as investors. Foreign investors are then allowed
to operate the project for a pre-agreed period (usually 15 to 25 years)
corresponding to the economic life of the asset before handing it over
to the state. In BOT projects, usually a consortium of companies
arranges financing without government guarantees.
The BOT Law No. 3996 (dated June 8, 1994) became effective from June 13,
1994. The subject law describes regulations and procedures to be
followed in BOT practices. According to the law, Turkish Government can
have private firms and foreign firms make investments on BOT basis for
bridges, tunnels, dams, irrigation, potable water, treatment plants,
sewage systems, telecommunications, power generation, transmission,
distribution, mining, environmental prevention investments, ports and
airports.
PROTECTING YOUR PRODUCT FROM INFRINGEMENT
Turkey lacks adequate, modern laws concerning intellectual property
protection, and even in cases of clear infringement enforcement is lax
and penalties are not severe. In order for action to be taken, a
company must present authorities with an iron-clad case. In this
environment, protecting products becomes a creative challenge for
vulnerable companies.
NEED FOR A LOCAL ATTORNEY
English-speaking attorneys specialized in commercial law, investment
legislation, joint ventures, corporate law, tax law, bankruptcy law,
public finance, banking corporations, criminal law, civil law and in
other areas are available for consultation by U.S. business people. A
list of specialized attorneys is available in US&FCS offices in Turkey.
The list includes the following U.S. law firms operating in Turkey:
Altheimer & Gray, Arnold & Porter (liaison office: Metin Somay Law
Offices), McDermott, Will & Emery, and White & Case.
CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES
RANK OF SECTOR: 1
NAME OF SECTOR: TELECOMMUNICATIONS EQUIPMENT
ITA INDUSTRY CODE: TEL
Recent laws passed by the Parliament should produce a boom in this
sector. New licenses will be issued for value added services most
requiring new investments. Existing services, e.g., paging systems,
analog type cellular phone networks, cable-TV, will need to be
modernized and/or expanded for better service and more customers.
The telephone network structure needs to accommodate more subscribers
and to improve quality. Intelligent network systems, ISDN, and fiber in
the loop systems will be future trends. The new telecommunications law
specifies that 20 percent of the income obtained from licensing fees for
value added services and 20 percent of Turk Telecom privatization
revenues will be used to improve the telephone structure. This revenue
is estimated at over $3.5 billion. Thus, a major opportunity in this
field exists and is expected to grow with international projects such as
fiber optic cable (including submarine types), microwave and satellite
projects to serve Turkey and East European, Black Sea countries, and the
Turkic Republics.
1994 1995 1996
A. Total Market Size 925 1,060 1,210
B. Total Local Production 640 700 770
C. Total Exports 95 100 110
D. Total Imports 380 460 550
E. Imports from the U.S 252 300 350
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 2
NAME OF SECTOR: ELECTRIC POWER SYSTEMS
ITA INDUSTRY CODE: ELP
Turkey requires an average annual increase in installed capacity of 1400
MW until the year 2000. A recent study made by Turkish Electricity
showed that $31.5 billion must be spent during the next 15 years to meet
demand. The Turkish Government is encouraging foreign companies to
invest in the power sector. Currently, U.S. firms are pursuing six BOT
power projects worth $2.4 billion that are already in progress.
Potential autogeneration projects, i.e., manufacturing centers building
their own power sources, are another good reason why this sector should
continue to be a best prospect. Transmission and distribution sectors
must be developed as well. These will require $8.5 billion in financing
until the year 2010. Renewable energy such as wind and biomass projects
will be needed in the future. Finally, the Turkish Government is
currently planning to privatize nine thermal power plants.
1994 1995 1996
A. Total Market Size 1,800 1,900 2,000
B. Total Local Production 920 1,000 1,100
C. Total Exports 200 250 300
D. Total Imports 1,080 1,150 1,200
E. Imports from the U.S. 145 190 250
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 3
NAME OF SECTOR: TEXTILE MACHINERY AND EQUIPMENT
ITA INDUSTRY CODE: TXM
Turkey is the world's seventh largest cotton producer and the sixth
largest textile/apparel exporter; the textile sector is Turkey's largest
exporter. With completion of the South Anatolia Project (GAP), cotton
production is expected nearly to double. Moreover, EU quotas on Turkish
apparel are expected to be dropped. In consequence, future production
prospects are excellent and Turkey will have to import more advanced
textile machinery. Most textile machinery is exempted from import
duties, if imported from EC or EFTA countries, but subject to 2.5-4.5
percent duty if imported from elsewhere, including the United States.
Market is currently dominated Germans, Swiss and Italians.
In certain areas of this market, there is strong preference for U.S.
machinery. Warping, sizing, denim producing, finishing and computerized
apparel manufacturing machinery and auxiliary machinery like dobbies,
automatic stop motions, shuttle changing mechanism, combs and jacquards
are among these. Germany, Turkey's primary apparel export market, will
start refusing products which are not produced under proper ecological
rules. This has special implications for imported finishing and dyeing
equipment.
U.S. companies have a most promising future in this market, which is
likely to grow eastward to include the Turkic Republics. U.S. companies
who select aggressive local agents with no ties to European companies
have the greatest probability to increase exports here.
1994 1995 1996
A. Total Market Size 448 873 1434
B. Total Local Production 25 32 45
C. Total Exports 8 9 11
D. Total Imports 431 850 1400
E. Imports from the U.S. 14 34 70
F. Exchange Rate 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 4
NAME OF SECTOR: TELECOMMUNICATIONS SERVICES
ITA INDUSTRY CODE: TES
Privatization of Turkish Telecom is expected to attract additional
investments in data, voice and video satellite services. The data
communications industry in Turkey is moving towards efficient satellite
communication, providing services to banks, newspapers, government
offices, transportation companies, universities and others.
COMSAT Digital Communications Services has been involved in a revenue
sharing arrangement with PTT for several years, and has recently
expanded into VSAT network systems through an arrangement with Sumitomo
and Koc-Unisys, the TURVSAT earth station. Applications include new
services such banking, pipeline monitoring, reservation networks, and
electronic mail. End-users of these applications in Turkey are banks,
airlines, transportation companies, energy pipelines, mines, automotive
centers, hotels, and broadcasting centers.
The Turkish Government's standards regulations for telecom services are
not clear yet. Experts are skeptical about obtaining guidance for third
party investors in the near future. COMSAT and other firms are trying
to convince the government that competitive regulations would encourage
foreign investment and are essential to growth in telecom services.
Value added services such as cellular, paging, cable TV, pay phones,
directory services, and interactive TV are expected to grow broadly over
the next three years because they will be licensed to the private
sector.
Demand for telecom services in the markets of Central Asia has spurred
growth for Turkey-based firms, which can benefit from the proximity to
the region by offering satellite services to newspapers, foreign
businesses, and others which utilize satellite equipment in these
countries.
1994 1995 1996
A. Total Sales 2,810 3,090 3,300
B. Sales by Local Firms 2,715 2,950 3,100
C. Export Sales by Local Firms 150 160 180
D. Sales by Foreign-Owned Firms 95 140 200
E. Sales by U.S.-Owned Firms 35 50 90
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 5
NAME OF SECTOR: MEDICAL EQUIPMENT
ITA INDUSTRY CODE: MED
The improvement of health care is a priority for the Turkish Government.
Demand is growing for imports of sophisticated laboratory equipment,
diagnostic imaging devices, items for nuclear medicine, cardiovascular
surgery and x-ray. The total 1995 Turkish market for medical equipment
and devices is about $310 million.
U.S. medical equipment and supplies are highly regarded in Turkey. The
Turkish medical/business community is very receptive to U.S. companies.
Germany has been, and will remain, the second most important supplier
for this market.
The largest purchaser of clinical devices in Turkey is the Ministry of
Health and its health care facilities. Teaching hospitals, university
hospitals, and the small but lucrative private hospital system, as well
as physicians' offices, are all oriented to higher-technology products.
Buyers prefer U.S. suppliers' high tech products, but consider them
expensive. The Second Health Project, which began in December 1994, has
a total budget of $200 million. It aims at improving health services in
23 low income provinces in eastern Turkey, and will be completed by the
end of 2001.
1994 1995 1996
A. Total Market Size 250 310 350
B. Total Local Production 75 75 80
C. Total Exports 10 20 30
D. Total Imports 185 255 300
E. Imports from the U.S. 20 30 40
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 6
NAME OF SECTOR: BUILDING PRODUCTS
ITA INDUSTRY CODE: BLD
Construction is a key sector in the Turkish economy, providing
employment for over 1 million people and serving as a locomotive for
several other sectors. In 1993 the construction sector grew by 8
percent, but because of an economic crisis in early 1994 it shrunk by 2
percent in 1994. However, the industrial sector shrunk by 5.7 percent
and the commercial sector by 7.5 percent during the same period.
In 1995 and after the sector must grow to accommodate an annual demand
for 600,000 dwellings, as well as commercial buildings necessitated by
rapid urbanization and the growing economy. Most building products are
manufactured locally. However, foreign building materials are
increasingly used, especially in tourism facilities which are allowed
customs-free importation of materials. Imports of raw materials and
auxiliary building products are also expected to increase in order to
support Turkey's international construction projects. Prefabricated
residences, logs, lumber, and insulation materials from the U.S. have
the best sales prospects.
1994 1995 1996
A. Total Market Size 1,950 3,150 3,600
B. Total Local Production 2,800 3,000 3,400
C. Total Exports 400 550 700
D. Total Imports 550 700 900
E. Imports from the United States 80 90 100
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 7
NAME OF SECTOR: COMPUTER SOFTWARE
ITA INDUSTRY CODE: CSF
Turkey's total electronic data processing (EDP) systems market was
nearly $1 billion in 1993, and 60 percent of this amount was imported.
Annual PC sales increased by 100 percent between 1990 and 1993. Still,
Turkey's per capita annual investment in EDP systems is only $15. If
this amount were to reach the level of Greece ($70), this would mean a
five-fold increase in the market.
Software constitutes about 15 percent of the total EDP market. This low
share is due to the novelty of the sector and insufficient legal
protection for intellectual property (IPR) in Turkey. Both of these
drawbacks should be eliminated soon as major software firms of the world
enter the local market, and the Turkish Government takes IPR measures to
conform to EU requirements.
Another boost to software sales is Turkey's prospective Customs Union
with Europe which will spur productivity. Elimination of customs duties
will make the country more accessible for European affiliates of U.S.
suppliers. Privatization of state enterprises will also result in
increased use of EDP as the number of personnel is reduced.
U.S. firms presently dominate both the hardware and software market in
Turkey and are expected to continue to do so for the foreseeable future.
1994 1995 1996
A. Total Market Size 65 79 90
B. Total Local Production 35 40 50
C. Total Exports - 1 5
D. Total Imports 30 40 45
E. Imports from the U.S. 20 25 30
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
TITLE: AUTOMOTIVE PARTS/SERVICE EQUIPMENT
SECTOR RANK: 8
ITA INDUSTRY CODE: APS
This sector supplies parts, 20 percent of which are imported, and
services to an automotive market of 3.7 million automobiles. In the
early 2000s, production of new cars in Turkey is estimated to reach 1
million per year. Currently, there are fifteen companies in the
automotive sector. Additionally, three Asian companies--Honda, Hyundai
and Mazda--have started investing here. The automotive market has
returned to growth after the 1994 downturn.
Analysts consider that this sector will remain Turkey's second largest
export sector, following textiles and apparel, for the next 10 years.
This sector, which grew by 32 percent in 1993, has completed new
investments to compete globally both in quality and quantity.
Currently, it is working under capacity, but as export markets grow,
this will change.
After Turkey joins the EU Customs Union in 1996, Turkey's spare parts
exporters will increase market share in the EU countries, even though
competition in Turkey will increase for vehicles. Experts expect that
Turkey will attract new investments from the spare parts industry to
benefit from the lowest labor costs in the whole European market.
Currently, European suppliers, followed by Japanese, dominate the
market. However, U.S. companies can increase their market share in
catalytic convertors, engine bearings, radiators, mufflers, exhaust
pipes, spark plugs and service equipment including lifts, especially 2-4
column ones, die cabinets and gas analyzers, electronic test equipment
and diagnostic equipment.
1994 1995 1996
A. Total Market Size 1,830 1,980 2,140
B. Total Local Production 1,450 1,600 1,760
C. Total Exports 540 595 655
D. Total Imports 920 975 1035
E. Imports from the U.S. 46 49 53
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 9
NAME OF SECTOR: AIRPORT/GROUND SUPPORT EQUIPMENT SERVICES
ITA INDUSTRY CODE: APG
The increase in aircraft, passenger and air cargo traffic, the expansion
and modernization of existing airports, and plans for the construction
of new commercial airports to meet increased traffic demand, underline
Turkey's growing need for airport ground support and handing equipment.
HAVAS, Turkey's largest airport ground handling company, which is under
privatization, is planning $16 million of investments to renew its
ground handling equipment inventory.
New airports are planned for: Sanliurfa (GAP region), Adana, Bodrum,
Istanbul (at Kurtkoy, Anatolian side), and Samsun (Carsamba).
Contracting for the construction of new international terminals at
Istanbul and Antalya airports is expected soon. The State Airports
Administration (DHMI) is currently making investments to bring Turkish
airports up to international standards.
Airport Ground Handling Equipment: The two important end-users of
airport ground handling equipment are HAVAS and CELEBI. Turkish
airlines (THY), Turkey's largest state-run airline, also provides
ground support services in small airports. Types of equipment needed
primarily from foreign sources are: aircraft towing tractors, ground
power units, air starter units, high loaders, and self propelled
passenger steps.
Air Traffic and Navigational Equipment: Devlet Hava Meydanlari
Isletmesi (DHMI) is responsible for all civil air traffic control
operations and navigational aid in Turkey, needs equipment and
instrumentation to upgrade and modernize existing airports. Needed
equipment includes: ILS, VOR, DME, communication equipment, other
navigation and air traffic control systems, and meteorological
apparatus.
Due to their technical superiority, U.S. products in this sector enjoy
an excellent reputation and have a high share of imports. (Equipment
needed by military airports is excluded from this analysis.)
1994 1995 1996
A. Total Market Size 13 18 24
B. Total Local Production 3 4 5
C. Total Exports - - -
D. Total Imports 10 14 19
E. Imports from the United States 6 9 12
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 10
NAME OF SECTOR: ELECTRONIC INDUSTRY PRODUCTION AND TEST EQUIPMENT
ITA INDUSTRY CODE: EIP
The Turkish electronic industry is growing rapidly. Despite an
interruption in investments in 1994 due to economic crisis, the sector
is expected to boom in forthcoming years.
Turkey's electronic industry is active in the following subsectors:
components, consumer electronics, telecommunications equipment, defense
electronic equipment, computers, and industrial electronic equipment.
Once privatization of the telecommunications sector is completed, new
regulations for telecommunication services and licenses are expected.
This will produce a considerable increase in the market for
telecommunications/electronics industry production, test and measurement
equipment.
1994 1995 1996
A. Total Market Size 140 150 165
B. Total Local Production 51 56 62
C. Total Exports 1 1 2
D. Total Imports 90 100 110
E. Imports from the U.S. 15 17 19
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 11
NAME OF SECTOR: ARCHITECTURAL/CONSTRUCTION/ENGINEERING SERVICES
ITA INDUSTRY CODE: ACE
Turkey's architectural, construction and engineering (ACE) services
sector must address its tremendous infrastructure needs. The value of
major project contracts signed in 1994 funded by treasury-guaranteed
foreign credits was $2.1 billion. In order to meet demand, the Turkish
Government must continue to invest in major infrastructure projects over
several years, and Turkey should offer a strong market for U.S.
services.
Upcoming major infrastructure projects requiring advanced technology and
foreign expertise include: Izmit gulf motorway bridge, Dardanelles
motorway bridge, Istanbul Ataturk airport's new international terminal,
the $1.2 billion Melen potable water project, the Bosphorus tube tunnel,
the Bosphorus third bridge, construction of several thermal and
hydroelectric power plants, a nuclear power plant, construction of new
airports and ports, and water, waste water, and solid waste management
projects in major cities.
According to its master plan, Istanbul's water and waste water projects
proposed for 1995 - 2002 are worth around $4 billion. The
Azerbaijan/Turkey crude oil pipeline, and the Turkmenistan/Kazakhstan/
Turkey natural gas line will most likely be constructed in the coming
years. Both projects will require foreign expertise.
Generally, Turkey is self-sufficient in construction services, but
foreign assistance is sought for major projects which require advanced
technology. The services of foreign firms are obtained for feasibility
studies, final project design work, and construction of large and
complex projects that require advanced technology and supervision.
Whenever possible, U.S. firms should form joint ventures with Turkish
firms to take advantage of the low cost Turkish labor force.
Main third country suppliers of ACE services in Turkey are Germany,
Italy, Japan, Sweden, and the U.K. Most European countries active in
this market have been making soft, tied loans for Turkish projects.
Build-Operate-Transfer (BOT), and Build-Own-Operate (BOO) projects are
also good opportunities for U.S. companies.
1994 1995 1996
A. Total Sales 225 250 315
B. Sales by Local Firms 235 265 330
C. Export Sales by Local Firms 100 110 120
D. Sales by Foreign Owned Firms 90 95 105
E. Sales by U.S. Owned firms 20 22 25
F. Exchange Rates 30,000 46,400 67,000
RANK OF SECTOR: 12
NAME OF SECTOR POLLUTION CONTROL EQUIPMENT
ITA INDUSTRY CODE: POL
Turkey's high birth rate, coupled with rapid urbanization and
industrialization, has created enormous environmental problems--solid
waste disposal, waste water contamination, and air pollution. The
Ministry of Environment has adopted U.S. EPA regulations for
environmental protection. Enforcement of these regulations is under the
authority of municipalities, some of which are striving hard to exercise
it.
Municipalities are seeking investments in pollution control. Either
through their own resources or backed by foreign financing, they hope to
are launch major environmental infrastructure projects creating
lucrative business opportunities.
For example, Izmir has plans for control of pollution in its bay.
Istanbul municipality is preparing to tackle protection of the Sea of
Marmara. Both public and private sectors have been active in developing
pollution control projects, although they are hampered by a dearth of
local investment funding. Breakdown of the market according to
subsectors in 1995 is as follows (in US$ millions): solid waste (175),
water treatment (130), air pollution control (99).
1994 1995 1996
A. Total Market Size 343 404 506
B. Total Local Production 172 213 271
C. Total Exports 7 8 10
D. Total Imports 164 183 225
E. Imports from the U.S. 14 15 18
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates.
RANK OF SECTOR: 13
NAME OF SECTOR: FOOD PROCESSING AND PACKAGING EQUIPMENT
ITA CODE: FPP
Turkey is rich agriculturally and is an exporter of most agricultural
products. Agricultural development is certain to boost demand for food
processing machinery.. For example, with the completion of the
irrigation component of the Southeastern Anatolia Project (GAP), there
will be 300 thousand hectares of land opened up to agriculture. The
region is expected to change from dependent on agricultural imports to
an exporter of many types of food products.
Another stimulus for imports of modern food processing and packaging
equipment is a dramatic increase in supermarkets, the adoption of EU
packaging standards, and implementation of an agri-export strategy.
Sophisticated packaging and labelling equipment are needed to improve
efficiency and quality of packaging. Other relevant food processing
imports will be: filtering, purifying and sorting equipment,
refrigeration units, oil/fat extractors, computerized inventory systems
for warehouses, and process control equipment.
Although the U.S. holds a small share of this market, aggressive local
representatives, trained service personnel and a stock of spare parts
would go a long way toward increasing market share in what is becoming a
highly competitive sector.
1994 1995 1996
A. Total Market Size 220 230 252
B. Total Local Production 125 140 150
C. Total Exports 20 25 30
D. Total Imports 130 136 149
E. Imports from the U.S. 14 15 17
F. Exchange Rate 30,000 46,400 67,000
Note: The above statistics are unofficial estimates.
RANK OF SECTOR: 14
NAME OF SECTOR: SECURITY SERVICES/EQUIPMENT
ITA INDUSTRY CODE: SEC
The private security sector is a very new industry only recently
recognized by Turkish authorities as a legal service for private
enterprises. In the past, only local police departments assumed
security for both public and private organizations, including banks and
commercial centers. Now, demand for more sophisticated, efficient
services to fit the needs of private residence owners and commercial
enterprises is on the rise.
U.S. electronic security equipment is used by several top firms in
Turkey, although electronic security equipment subsector is still small.
New applications for electronic security systems in the near future
include factories, private banks, and private businesses. U.S.
electronic security equipment is cheaper than European counterparts and
is generally recognized as the best for use in central station network
applications.
Private Turkish banks and other cash-based establishments are starting
to contract out for cash-in-transit (CIT) services for the first time.
Armored vehicles and equipment are in demand, as banks and private firms
are becoming more security conscious about money transport. U.S. firms
with expertise in high-tech equipment should consider joint ventures
with locally based security companies looking for diversification.
1994 1995 1996
A. Total Market Size 75 110 150
B. Total Local Production n/a n/a n/a
C. Total Exports n/a n/a n/a
D. Total Imports n/a n/a n/a
E. Imports from the U.S.
F. Exchange Rates 30,000 46,400 67,000
The above statistics are unofficial estimates. Total import/export
statistics are not yet available.
SECTOR RANK: UNRANKED*
NAME OF SECTOR: DEFENSE INDUSTRY EQUIPMENT
ITA INDUSTRY CODE: DFN
Turkey's April 1994 economic austerity measures forced military
procurement agencies (including the Undersecretariat for Defense
Industries--SSM) to postpone, reduce in size, or cancel some defense-
related procurement programs. Nevertheless, Turkey, in a difficult
geopolitical location, maintains the second largest armed forces in
NATO--over 800,000 personnel or 37 percent of the standing manpower
forces in Europe available to NATO.
In 1984, Turkey began a defense-related modernization program which
involves coproduction of F-16 fighter aircraft, armored infantry
fighting vehicles, shoulder-launched Stinger missiles and light
transport aircraft. At present, while Turkey cannot finance all of its
planned defense procurement projects, it will remain a good market for
U.S. off-the-shelf products.
Receptivity to U.S. defense products is high in the Turkish market. We
expect that as Turkish economic conditions improve, the market for U.S.
defense-related products will again offer good opportunities for U.S.
producers. Future requirements of the Turkish Armed Forces include
attack and army scout helicopters, airborne warning and control systems,
modern tanks, tank rescue vehicles, patrol boats, improved
communications, mobile radars and various types of advanced warships.
1994 1995 1996
A. Total Market Size 2,010 1,800 1,900
B. Total Local Production 300 500 500
C. Total Exports 50 200 300
D. Total Imports 1,760 1,500 1,700
E. Imports from the U.S. 700 500 800
F. Exchange Rates 30,000 46,400 67,000
Note: The above statistics are unofficial estimates.
*We have chosen not to rank this sector, as its growth is dictated by
government procurement rather than market forces.
BEST PROSPECTS FOR AGRICULTURAL GOODS
RANK SECTOR
1 Tobacco
2 Rice
3 Vegetable Oil
4 Wood Logs
5 Cotton
6 Tallow
AGRICULTURE: TOP THREE SECTORS
(all figures in metric tons)
A. Rank: 1
B. Name of Sector: TOBACCO
C. PS&D Commodity Heading:
1994 1995(est) 1996(prj)
D. Total Consumption 154,000 182,000 190,000
E. Total Local Production 213,000 220,000 220,000
F. Total Exports 121,000 120,000 125,000
G. Total Imports 21,000 26,000 30,000
H. Total Imports from U.S. 16,000 19,000 22,000
A. Rank: 2
B. Name of Sector: RICE
C. PS&D Commodity Heading:
1994 1995(est) 1996(prj)
D. Total Consumption 400,000 425,000 450,000
E. Total Local Production 165,000 165,000 165,000
F. Total Exports 2,000 2,000 2,000
G. Total Imports 250,000 275,000 285,000
H. Total Imports from U.S. 200,000 210,000 210,000
A. Rank: 3
B. Name of Sector: VEGETABLE OIL
C. PS&D Commodity Heading:
1994 1995(est) 1996(prj)
D. Total Consumption 940,000 950,000 960,000
E. Total Local Production 625,000 600,000 620,000
F. Total Exports 255,000 100,000 110,000
G. Total Imports 505,000 4,500,000 500,000
H. Total Imports from U.S. 85,000 85,000 85,000
SIGNIFICANT INVESTMENT OPPORTUNITIES
Telecommunications Value Added Services Licensing:
There is great potential in the telecommunications sector for U.S.
firms. Under a World Bank credit and also with the support of U.S.
Trade and Development Agency, Privatization Administration (PA) of
Turkey will soon hire U.S. consultants to advise PA on the policy
framework of value added services in the telecom sector. License
tenders will be out from the beginning of 1996 for cable-TV (on regional
basis), pay phones, paging services license, a third cellular license,
data communications and maybe more. Strong demand exists for all these
services with a population at 2.3 percent per year.
Power Sector--BOT Power Projects:
Demand for power is growing at a rate of 8 percent every year in Turkey.
Medium term projections indicate that Turkey needs an average of 1400 MW
additional power capacity each year to meet the demand until the year
2000. The Turkish Government is giving strong encouragement to foreign
companies to invest in BOT power projects. Ministry of Energy and
Natural Resources (MENR) will soon announce a BOT tender for
construction of several hydroelectric power plants. MENR has currently
six U.S. companies involved in BOT type thermal power (natural gas fired
or coal fired) plant proposals with a total project cost of $2.5
billion. MENR is open to discuss other BOT investment proposals.
The Government of the United States acknowledges the contribution that
outward foreign direct investment makes to the U.S. economy. U.S.
foreign direct investment is increasingly viewed as a complement or even
a necessary component of trade. For example, roughly 60 percent of U.S.
exports are sold by American firms that have operations abroad.
Recognizing the benefits that U.S. outward investment brings to the U.S.
economy, the Government of the United States undertakes initiatives,
such as Overseas Private Investment Corporation (OPIC) programs,
investment treaty negotiations and business facilitation programs, that
support U.S. investors.
CHAPTER VI. TRADE REGULATIONS AND STANDARDS
TRADE BARRIERS, INCLUDING TARIFFS, NON-TARIFF BARRIERS AND IMPORT TAXES
Turkey is a member of the GATT and regulates its customs practices in
line with GATT requirements. In 1989, Turkey, along with the United
States, converted to the new GATT Harmonized System. Trade with the
United States is based on the Treaty of Commerce and Navigation of 1929.
It provides for the mutual unconditional most-favored-nation treatment
in the application of all import and export duties and restrictions.
However, European Union (EU) and EFTA countries are assigned a lower
duty rate under Turkey's association agreement with the EU and its free-
trade agreement with EFTA countries. Scheduled duty reductions outlined
in Turkey's 1964 EC association agreement were enumerated in the 1993,
1994 AND 1995 Import Regimes. Duty rates are higher for some U.S.
products and other non-EU/EFTA countries, even though overall duties
have been reduced. Turkey is scheduled to complete a customs union
agreement with the EU by the end of 1995 and all goods imported from the
EU will be duty free. Most goods, except textiles and some agricultural
goods export from Turkey to the EU, are already free from duties.
CUSTOMS VALUATION
Import duties are calculated exclusively on C.I.F. prices. Importers
are also responsible for paying the VAT. The VAT is calculated on a
C.I.F. basis and has a ceiling of 23 percent; however, most industrial
products are charged a rate of 15 percent. VAT is also charged to
locally produced goods. Capital goods, some raw materials, imports by
government agencies and enterprises, and products for investments with
incentive certificates are exempt for import fees.
IMPORT LICENSES
All importers must obtain a general import license valid for one year
from the Undersecretariat of Foreign Trade (UFT). The general license
specifies two-digit H.S. numbers, or chapters of products, that the
importer is allowed to import. There are no restrictions on obtaining a
general import license.
All importers are required to obtain an import permission certificate
for each type of item to be imported. Without an import permission
certificate, a bank cannot issue foreign exchange for payment. Import
certificates are obtained from the Turkish Central Bank or commercial
banks. Goods cannot be cleared through Customs without a separate
certificate for each eight-digit customs tariff code product. An import
certificate is valid for the periods specified by the importer and can
be extended if necessary by banks. The country from which goods are
being received, the country of origin, the country where payment is to
be transferred, and the importer's name must be stated on the import
permission certificate.
For imports of motion pictures, full-video cassettes and their
brochures, and advertisements, an import certificate is issued by banks.
Only the actual cost of the item is considered, not the royalty costs.
As a general practice, parts not specified on the import certificate
that need to be transported with a machine due to technical concerns are
permitted by Turkish Customs without any duty charge.
EXPORT CONTROLS
Turkey was a member of COCOM and has actively participated in the
planning discussions for a COCOM-successor regime. Since Turkey is not
a major producer or exporter of dual-use or other sensitive
technologies, the country's export control inspection and licensing
infrastructure is dispersed and only loosely linked, involving the
Ministry of Industry and Trade, Undersecretariats of Customs and the
Treasury, and participation by expert scholars and technicians from
academia on an ad hoc basis. However, talks are under way within the
government to consolidate appropriate export control and
nonproliferation experts from the various ministries into one
nonproliferation agency attached to the Ministry for Foreign Affairs.
Legislation has been drafted to this effect, but not yet submitted to
Parliament.
IMPORT/EXPORT DOCUMENTATION
Turkish documentation procedures follow the European Union system. All
commercial shipments must be accompanied by a commercial invoice, a
certificate of origin and a bill of lading or airway bill, depending on
the method of shipment used.
Commercial Invoice: The commercial invoice must be submitted in
triplicate, including the original copy; it must contain a complete
description of the goods and all required payment terms. The original
must be signed by the exporter as follows: "We hereby certify that this
is the first and original copy of our invoice, the only one issued by
our firm for the goods herein mentioned." It must be certified by the
Turkish Embassy or Consulate in the United States. The charge for
certification is .004 percent of the shipment's value. At least one
copy of the invoice should travel with the goods, and the original
should be sent to the importer through the correspondent bank.
Certificate of Origin: The certificate of origin is to be prepared in
duplicate. No corrections are permitted on this document, which is to
be prepared in English by a local chamber of commerce. The certificate
of origin must be certified by the Turkish Embassy or Consulate in the
United States. One copy of the document must be surrendered to the
customs authorities at the time of importation.
Bill of Lading: Details in the bill of lading should correspond exactly
to those given in other shipping documents.
Pro-forma Invoices: The pro-forma invoice, which supports an import
permit application, must be no more than six months old at the time of
application, contain an unexpired option (if appropriate), indicate
freight and insurance charges separately, and bear the importer's name.
TEMPORARY ENTRY
A material may be temporarily imported into Turkey without payment of
duties and tax if it is to be used in the production or manufacture of a
product that is to be exported. The importer gives security in the form
of a bank guarantee in the amount of applicable duties and taxes. Upon
exportation of the finished product, the guarantee is released.
Temporary admission of goods intended for reexport in their original is
permissible free of import duties and taxes with the approval of the
Undersecretariat for Foreign Trade.
Books, newspapers, magazines, catalogs, pamphlets, brochures, and
similar advertising materials are exempt from customs duty. Samples of
no commercial value are admitted duty free.
Samples with commercial value may be imported into Turkey under the
temporary importation system. For samples imported under this system, a
letter of guarantee is required by the customs authorities. The letter
of guarantee should be prepared to reflect the value of the samples as
if they were actually being imported. At the end of the temporary
importation period, generally six months and extendable for another six
months, or when the samples are reexported, the letter of guarantee is
returned by the customs authorities.
U.S. traders may also wish to consider a more simplified procedure in
the form of a "ATA Carnet." Carnets are international customs documents
permitting the holder to temporarily import products as samples without
paying customs duties or posting bonds. In the United States, carnets
are sold by the U.S. Council for International Business at the following
locations: in New York, NY, (212) 354-4480; Long Beach, CA 90010, (310)
420-2777; Schaumburg, IL, (708) 490-9696; San Francisco, CA (415) 956-
3356; Miami, FL (305) 592-6929; Timonium, MD (301) 561-0438; Boston, MA
(617) 737-3266; and Houston, TX (713) 847-5693.
LABELING, MARKING REQUIREMENTS
All packages, cases, and bales must bear shipping marks, numbers,
dimensions, and the gross weight of the merchandise. Packages and the
bills of lading that are to be shipped through Turkey should be marked
"In Transit." All goods entering Istanbul or any other entry port in
Turkey (Izmir, Mersin, Iskenderun, Sinop, Samsun, and Trabzon) will be
cleared through customs, and full payment of duty will be required
unless the packages and bills of lading are marked "In Transit." If so
marked, the goods may be cleared for entry and reshipped.
PROHIBITED IMPORTS
Products which are currently prohibited include weapons and narcotics.
However, under certain conditions the Ministry of the Interior, Security
General Directorate will provide clearance to import shotguns, hunting
rifles, and explosives. The 1995 Turkish Import Regime also prohibits
the importation of products containing fluorocarbon-type materials from
countries that have not signed the standards (e.g., ISO 9000.)
The metric system is used for weights and measures. Electrical current
is 220 volt, 50 cycles. Time in Turkey is seven hours later than
Eastern Standard Time. From April through October, Daylight Savings
Time is used.
The Turkish Standards Institution (TSE), established in 1954, sets
standards in Turkey and keeps abreast of standards in other countries.
TSE, an accredited agency in the international markets, issues the
guarantee certificates. Almost all the major companies seek TSE's
certification for their products. This certificate helps to ensure
manufacturers fair competition and ensures the consumer of the quality
of goods purchased. Correspondence to the TSE should be addressed as
follows: Turk Standartlar Enstitusu, Necatibey Caddesi, Ankara, Turkey.
Turkey has around 11,000 standards, 95 percent of which are compatible
with ISO/IEC standards. Turkey ranks third among European countries in
terms of number of standards. Around 900 of the 11,000 standards are
obligatory, i.e., the manufacturers are forced by law to have their
products certified by TSE. The obligatory standards cover goods ranging
from foodstuffs to medical equipment. Importers must receive TSE's
approval on imports of goods covered by obligatory standards. About 130
foreign companies which export their products to the Turkish market
received TSE certificates for 250 products. Some of these are Philips,
Hitachi, Siemens and General Electric.
Following Turkey's resolution to implement the ISO 9000 Quality
Management Standards in 1988, the TSE prepared the compatible TS-ISO
9000 Turkish Standards. Since then 300 companies have applied and more
than 20 companies have been issued TS-ISO 9000 certificates.
SPECIAL IMPORT PROVISIONS
There are a number of other products that can only be imported by
specific government agencies or pre-approved organizations. Alcohol can
only be imported by the government monopoly enterprise, TEKEL.
Cigarettes can only be imported by TEKEL and cigarette producers which
are permitted by the government under a special decree (such as Philip
Morris, R.J. Reynolds, British Tobacco, etc.). X-ray film can only be
imported by the Red Crescent Association (similar to the Red Cross).
Precious metals and stones, excluding diamonds, can only be imported by
commercial banks authorized by the Central Bank (Decree No. 93/4143,
March 21, 1993).
Import permission certificates must be obtained from the Directorate
General of Curative Care Service in the Ministry of Health and
Agriculture to import the following products: organic chemicals,
especially those used to produce medicines and medical products;
chemicals used in the cleaning and food industry; vaccines for both
human beings and animals; live animals and plants; and grains, plant
seeds, and hormones.
Products requiring after-sales service such as motor vehicles, household
electrical goods, office equipment, heaters, gas-fired burners, lathes,
and wireless equipment require an import permission certificate from the
Ministry of Industry and Commerce. In order to obtain such a
certificate, importers must guarantee that they will establish a spare-
parts network and maintenance capability in each of the seven geographic
areas of Turkey.
Telecommunications equipment such as automatic data processing machines,
electrical apparatus for line telephony or telegraphy, and telephone
answering machines need type-approval of the Turkish telecommunications
authority (Turk Telekom), frequency-related products require the
approval of the Directorate General of Wireless Affairs (TGM).
Under the 1995 Import Regime, importers need to obtain a control
certificate from the Ministry of Environment for materials which are
detrimental to the environment, such as hard coal, lignite, petrocoke,
arsenic, mercury, lead sulfides and carbonates, fluorocarbons, etc.
CHAPTER VII. INVESTMENT CLIMATE
OPENNESS TO FOREIGN INVESTMENT
Turkey has been pursuing liberal and outward oriented economic policies
since the 1980s. Turkey views foreign direct investments as vital to
its economic development and prosperity. Accordingly, Turkey has a very
liberal investment regime in which foreign investments receive national
treatment. Almost all areas open to the Turkish private sector are also
open to foreign participation and investment.
The Undersecretariat of Treasury screens foreign investments, but we are
unaware of any foreign investment proposals that Treasury has denied.
Screening mechanisms are routine and non-discriminatory. They do not
serve as an impediment to investment, limit competition or protect
domestic interests.
All rights, exemptions and privileges granted to national capital and
business are available under the same conditions to foreign capital and
business working in the same field. Foreign companies established in
Turkey are considered Turkish businesses. Apart from aviation, maritime
transportation, insurance and broadcasting, where equity participation
by foreign shareholders is limited to 49 percent, there are no major
sectors in which foreign investors do not receive national treatment or
MFN treatment.
The Turkish Government privatizes state economic enterprises through
block sales, public offerings, and/or a combination of both. Foreign
investors can participate in privatization in all cases. The Turkish
Government has been making block sales to foreign firms since 1986 in
the cement, iron and steel, appliance, automotive, telecommunication,
and airline sectors. Foreign investors receive national treatment in
privatization programs, too. They are allowed to participate in
privatization programs from the initial stage onwards. The government's
privatization program for 1995 envisages the block sale of its stakes in
the telecommunication, air transport, textile, iron and steel,
petrochemicals, and oil sectors in the coming months. The government is
actively seeking the participation of international investors.
There is no discrimination against foreign investors at any stage of
investment. Turkey grants all rights, incentives, exemptions and
privileges available to national capital and business to foreign
business and capital. U.S. and foreign firms can participate in
government financed and/or subsidized research and development programs
on a national treatment basis. There are no discriminatory or
excessively onerous visa, residence, or work requirements for foreigners
locally employed. There is no limitation placed on the assignment of
expatriates as managers or technical staff.
Foreign direct investment is viewed favorably by almost all non-
governmental groups. However, some politicians and trade unions oppose
block sales of state economic enterprises to foreigners.
Turkey provides investment incentives including subsidized credit
facilities, and exemptions on corporate and value-added tax, customs
fees, and duties. Investment incentives are clearly specified in
regulations. The size of investment incentives depends upon the
geographic location, sector, and value of the investment. Investment
incentives are greater in "priority" (less developed) regions and
eligibility depends on a minimum value.
The government of Turkey annually issues a list of investment
incentives. In order to take advantage of such incentives, a foreign
investor must obtain a special "Incentive Certificate." According to
the current incentive regime, a minimum investment of at least $100,000
is necessary for priority development regions and approximately $500,000
for other regions. Incentives for 1995 are as follows:
-- Investment Allowance: This is a corporate tax exemption on foreign
investments. Rates of investment allowance range from 30% to 100% of
the total fixed investment, depending on the location of the investment
(100% for priority development regions and industrial belts, 30% for
industrialized regions).
-- Customs Duties Exemptions: machinery and equipment are exempt from
customs fees, taxes and duties except for a payment of between 5 and 25
percent to the Mass Housing Fund. The government is phasing out the
Mass Housing Fund, and expects to fully abolish it by January 1, 1996.
-- Customs exemptions on raw materials (in accordance with the
specifications mentioned in the regime).
-- Refund of VAT (Value-Added Tax) for locally purchased machinery (An
additional 10% repayment for special sectors).
-- VAT deferral on imported machinery and equipment.
-- Land Allocation: Potential investors planning to invest in
priority development regions and industrial belts can apply to the
General Directorate of Land and the related Industrial Zones for factory
lots.
-- Exemption from letters of guarantee for imported capital equipment.
Subsidies for letters of guarantee costs required in obtaining foreign
credits are also available.
-- Exemption from building and construction taxes
-- Discounts on electricity charges
-- Soft loans for
- Research and development investments
- Environmental investments
- Small and medium size enterprises
-- Special credits
In addition to the incentives mentioned above, investors can benefit
from additional tax deferrals which are determined by the Ministry of
Finance on an annual basis. For 1995, corporations can defer up to 20%
of their annual corporate tax amounts provided that this sum does not
exceed the R&D expenditure of the corporation during the same year.
Turkey offers generous export incentives such as exemption from VAT and
other taxes, duties and charges, customs duties exemption from imported
raw materials for export items, energy incentives, credits through Turk
EXIMBANK, pre-shipment export credits, revolving export credits and
buyer's credits.
Turkey has a rather liberal foreign trade regime. There are no
discriminatory or preferential export policies and import policies
affecting foreign investors.
CONVERSION AND TRANSFER POLICIES
Turkish law guarantees the free transfer of profits, fees and royalties,
and repatriation of capital. This guarantee is reflected in Turkey's
bilateral investment treaty with the United States, which mandates
unrestricted and prompt transfer in a freely usable currency at a legal
market clearing rate for all funds related to an investment. There is
no difficulty in obtaining foreign exchange. There are no limitations
on the inflow or outflow of funds for remittances.
EXPROPRIATION AND COMPENSATION
Under the bilateral investment treaty with the United States (codifying
existing Turkish law), expropriation can only occur in accordance with
international law and due process. Expropriations must be for public
purpose and non-discriminatory. Compensation must be reasonably prompt,
adequate and effective. Under the U.S.-Turkey bilateral investment
treaty, investors have full access to the local court system and the
ability to take the host government directly to third party
international binding arbitration to settle investment disputes. There
is also a provision for state-to-state dispute settlement.
As a practical matter, the Turkish government occasionally expropriates
private property for public works or for state enterprise industrial
projects. The Turkish government agency expropriating the property
negotiates and proposes a purchase price. If the owner of the property
does not agree with the proposed price, he can go to court to challenge
the expropriation or ask for more compensation.
DISPUTE SETTLEMENT
We are not aware of any major investment disputes, including outstanding
expropriation/nationalization cases since 1990.
The only investment dispute in recent memory involving a U.S. firm
concerns a failed attempt by the municipal authorities in Iskenderun to
expropriate facilities owned by MacAndrews and Forbes, a Camden, New
Jersey firm. The firm's beach front property had appreciated
considerably since the facilities were established more than 100 years
ago, but the authorities were willing to pay only a fraction of its real
value. A Turkish court decided in favor of MacAndrews and Forbes in
1989.
There are effective means for enforcing property and contractual rights
in Turkey. There is no government interference in the court system.
Turkey has a written and consistently applied commercial and bankruptcy
law.
Turkey is a member of the International Center for the Settlement of
Investment Disputes (ICSID) -- also known as the Washington Convention -
- and the New York Convention of 1958 on recognition and enforcement of
foreign arbitrage awards. Turkey ratified the convention of the
Multinational Investment Guarantee Agency (MIGA) in 1987. By
withdrawing its general derogation to "codes of liberalization of
capital movements and invisible transactions (OECD codes)" capital
movement and invisible transactions have been liberalized to a great
extent.
POLITICAL VIOLENCE
For the last ten years, urban and rural acts of terrorism throughout
Turkey have caused injury and loss of life to government officials and
civilians, including some foreign tourists. Most incidents have
occurred in eastern Turkey. In 1993, one terrorist group, the Kurdistan
Workers' Party (PKK), began to target tourist sites and tourist-oriented
facilities in western Turkey in an effort to inflict economic harm on
Turkey by discouraging tourism. Some terrorist groups have also
targeted the personnel and property of organizations with official and
commercial ties to the United States.
PERFORMANCE REQUIREMENTS AND INCENTIVES
There are no performance requirements imposed as a condition for
establishing, maintaining or expanding an investment. There are,
however, some requirements for access to tax and investment incentives.
There are no requirements that nationals own shares in investments by
foreigners, that the share of foreign equity be reduced over time, or
that the investor transfer technology on certain terms. Investors need
not purchase from local sources or export a certain percentage of
output. Access to foreign exchange has no relation to exports.
There are no government-imposed conditions on permission to invest,
including location in specific geographical areas, specific percentage
of local content -- for goods or services -- or local equity
substitution for imports, export requirements or targets, employment of
host country nationals, technology transfer, or local financing.
The Turkish government does not request that investors disclose
proprietary information, other than publicly available information, as
part of the regulatory approval process. Enterprises with foreign
capital must send their activity report, submitted to the general
assembly of shareholders, auditor's report and balance sheets to the
GDFI every year by May.
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
Foreign and domestic private entities have the right to freely establish
and own business enterprises and engage in all forms of remunerative
activity except in sectors like aviation, maritime transportation,
insurance and broadcasting where the equity participation ratio of
foreign share holders is limited to 49 percent of an entity (in
broadcasting the limit is 20 percent). Beyond these areas, private
entities may freely establish, acquire, and dispose of interests in
business enterprises and foreign participation is permitted up to 100%.
Competitive equality is the standard applied to private enterprises in
competition with public enterprises with respect to access to markets,
credit, and other business operations. Turkey is currently in the
process of adopting the European Union's competition policy.
PROTECTION OF PROPERTY RIGHTS
Turkey's legal system adequately protects most property rights of
foreign investors, without discrimination. Protection of intellectual
property (IP) rights, however, does not meet western standards.
The United States has worked closely with Turkey for several years to
improve IP legislation and enforcement. Because of Turkey's inadequate
protection for IP rights, since 1992 the United States has listed Turkey
on the "priority watch list" of countries which fail to protect American
firms' IP rights, as specified under the "Special 301" provision of the
1988 Trade Act. The United States, responding to a petition from U.S.
industry, is also reviewing Turkey's continued eligibility for GSP
(Generalized System of Preferences) treatment in light of its failure to
adequately protect IP.
There has been significant progress on the legislative front in early
1995 (see below). This is being driven primarily by Turkey's desire to
enter into a customs union with the European Union from January 1, 1996.
The agreement with the EU requires Turkey to meet EU standards for IP
protection, which are essentially the same as the standards agreed to in
the Uruguay Round . Turkey is a member of the World Trade Organization
and a party to the TRIPS (Trade-related aspects of intellectual
property) Agreement. Turkey is also a member of the World Intellectual
Property Organization. In mid-1995, attempting to remain on schedule
for customs union accession, the Turkish Government passed new
legislation on copyrights and patents. This new legislation, while
offering improvements, does not fully answer a number of key U.S.
concerns, e.g., with protection for pre-existing works, sanctions
against violators, or pharmaceuticals protection.
It remains to be seen how effective the new laws will be in improving
Turkey's dismal enforcement record. The government intends to establish
a number of special courts to hear IP cases tried under the new laws.
However, many observers doubt the ability of Turkey's justice system --
already seriously overburdened -- to create these new courts and provide
the technical training required.
Copyrights: In June 1995, capping years of discussion, Turkey's
Parliament approved legislation amending Turkey's 1951 copyright law
("Intellectual and Artistic Works Law"). The amended law -- which came
into effect on June 12 -- significantly improves protection for books,
videos, sound recording, computer programs, and other copyright-
protected media. Fines are also substantially increased. When it is
fully implemented later this year, the new law should have a significant
impact on the current widespread, unauthorized copying and sale of U.S.-
origin books, tapes and software.
The 1987 Cinema, Video, and Music Works law provided greater protection
for some of these artistic works through a registration system. It has
helped reduce piracy, but enforcement has been problematic and penalties
are not harsh enough to act as a deterrent. The Turkish Government has
submitted a revised version of the law to the National Assembly that
would increase penalties, but as of June 1995 the Assembly had not
passed it. Turkey is a member of the Berne Copyright Convention (1948
Brussels text); a bill on Turkey's accession to the 1971 text is now in
Parliament.
Patents: In June 1995, the Turkish Government enacted a new patent law.
After 10 years of discussion, and two years of debate in Parliament, the
Prime Minister now has the power to issue the new law by decree, as part
of a package of legislation required for the customs union. However,
the patent bill is weakened by the absence of pipeline protection and
its broad compulsory licensing provisions. The agreement with the EU
allows Turkey to postpone introduction of patent protection for
pharmaceuticals until 1999. Turkey is a member of the Paris Convention
for the Protection of Industrial Property.
Trademarks: A trademark law has been drafted and is included in the
package of bills which the Prime Minister can enact by decree.
Counterfeiting of foreign trademarked products is currently widespread.
Trade secrets: There is currently no Turkish law specifically
protecting trade secrets.
REGULATORY SYSTEM: LAWS AND PROCEDURES
The Turkish Government has adopted a transparent policy and effective
laws to foster competition and normally follows competitive bidding
procedures. Occasionally, the Turkish government agencies make direct
orders to firms or state economic enterprises if the quantity is small.
Some tenders are only open to domestic firms, while large tenders which
require foreign finance, technology and service imports are made
internationally. A law on the prevention of unfair competition came
into force in 1989 which protects industry against unfair competition
due to dumped or subsidized imports. Turkish foreign investment
legislation does not allow companies special privileges or to become
monopolies. The Turkish government will be adopting the European
Union's public procurement procedures by January 1, 1996 if the Customs
Union with EU is successfully concluded.
There are tax, labor, health and safety, and other laws and policies to
avoid distortions or impediments to the efficient mobilization and
allocation of investment.
Bureaucratic procedures are, in general, streamlined and transparent.
The Turkish government has substantially reformed these laws since 1980.
In a draft decree that has already been submitted to the Council of
Ministers, the Turkish government is aiming to remove all bureaucratic
barriers for foreign capital entries. The 1992 foreign direct
investment law is currently being aligned in conformity with the most
liberal regulations of OECD countries. Under the new decree, the
approval of the Cabinet will not be required for foreign capital entries
over $150 million as was the case before. Foreign companies will not be
required to hold their capital in Turkey in local currency. Companies
will be allowed to place their capital in foreign currency deposit
accounts. If a local company sets up a partnership with a foreign
company it will only inform the Treasury of the deal rather than
obtaining preliminary approval of the latter.
To avoid the risk of "double" taxation on U.S. firms (in both the United
States and Turkey), a tax treaty has been initialed by the two
governments. The treaty for the avoidance of double taxation is
expected to be signed in coming months. Numerous double taxation
treaties are also in effect with other countries.
Turkish social law is also transparent. All employees must be insured by
the government's social security organization. Both employees and
employers are subject to social security premiums in Turkey (except
expatriates employed by a non-resident employer for a limited duration
on condition that they are insured abroad).
Under Turkish labor law, most workers have the right to associate freely
and form representative unions. Turkish government bars military
personnel, teachers, police and civil servants (broadly defined as
anyone directly employed by central government ministries and certain
state economic enterprise employees) from organizing unions, but
constitutional amendments granting all categories of employees the right
to form unions and expanding the right to strike were submitted to
Parliament in late 1992 (refer to section D below). An arbitration board
settles disputes in cases where strikes are forbidden.
The Turkish Government has established a "one stop" agency, the General
Directorate of Foreign Investment (GDFI) within the Undersecretariat of
Foreign Trade, to deal with issues related to foreign investments.
Sometimes it can be time consuming to get things done, depending on the
type of investment. Turkish government assistance is basically limited
to the point at which a company is formed--then the firm is treated as a
local company. Companies with foreign partners/parents often do not feel
as free to operate in Turkey's "liberal" environment as do wholly local
firms.
Turkey has BOT (Build-Operate-Transfer) legislation which allows foreign
firms to participate in some of the state investment projects which
require advanced technology and/or large amounts of financing on a
Build-Operate-Transfer basis. In BOT projects, the government
guarantees to buy products produced at a certain price over a certain
period. Projects include construction of bridges, dams, tunnels,
motorways, railways, sea ports and airports for civilian usage,
irrigation, potable-water and sewerage systems, waste water treatment
plants, factories, power plants, energy transmission, mining and
telecommunications. International companies have demonstrated
significant interest in power plant projects based on the BOT model.
BILATERAL INVESTMENT AGREEMENTS
Since 1985, Turkey has been negotiating and signing agreements for
reciprocal promotion and protection of investments with various
countries. As of May 1994, Turkey has signed or initiated bilateral
investment protection and promotion agreements with 31 countries.
Eleven of these agreements are now in force with the United States,
Germany, Holland, Belgium-Luxembourg, Denmark, Austria, Switzerland,
Japan, Tunisia, Kuwait, and Bangladesh. Negotiations with a number of
other countries are continuing. Turkey's bilateral investment treaty
with the United States came into effect on May 18, 1990. Avoidance of
double taxation agreements have been signed with 15 countries. A tax
treaty between the United States and Turkey has also been initialed and
expected to be signed in the near future.
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
The Overseas Private Investment Corporation (OPIC) offers its full range
of programs in Turkey, including political risk insurance for U.S.
investors under its bilateral agreement between the U.S. and Turkey.
OPIC is also active in financing private investment projects implemented
by U.S. investors in Turkey. In 1987, Turkey became a member of the
Multinational Investment Guarantee Agency (MIGA).
LABOR
The Turkish labor force numbers around 21 million persons, with
approximately 46 percent employed in agriculture. With an official
national unemployment rate of 8.3 percent (but probably significantly
higher, especially in urban areas, due to discouraged workers leaving
the labor force), and the minimum school-leaving age raised from 11 to
14 only in the past two years, Turkey has an abundance of unskilled and
semi-skilled labor. However, there is a shortage of qualified workers
for highly automated, high-tech industries. Individual high-tech firms,
both local and foreign-owned, have generally conducted their own
training programs for such job categories. Vocational training schools
for some commercial and industrial skills exist in Turkey at the high
school level. Traditional apprenticeship programs--formal and informal-
-are also common. Turkey's labor force has a reputation for being
hardworking, productive and very dependable. Approximately 50% of the
country's 60 million inhabitants are under age of 21.
Labor-management relations are generally good. Employers are obliged by
law to negotiate in good faith with unions that have been certified as
bargaining agents. Strikes are usually of short duration and almost
always peaceful. The incidence of strikes decreased markedly in 1994
(27 percent lower than in 1993). Since the 1980 military coup Turkey
has faced criticism in the International Labor Organization (ILO),
particularly for shortcomings in enforcement of ILO convention 98 (right
to organize and collective bargaining). Current labor law prohibits
"civil servants" (defined broadly as all employees of the central
government ministries, including teachers) from forming legally-
recognized trade unions. The current government is seeking approval of
a constitutional amendment to permit civil servants the legal right to
unionize. At issue is whether and to what extent civil servants will
have the right to strike and collective bargaining. In 1992, the
Turkish National Assembly ratified seven ILO Conventions, including no.
87 (Freedom of Association) and no. 151 (Right to Organize in the Public
Sector). The government accepted ILO Convention no. 158 (Termination of
Employment at the Initiation of the Employer) in 1994.
FOREIGN TRADE ZONES/FREE PORTS
The infrastructure for industrial operations has improved considerably,
especially in the western part of the country. Presently, there are five
Free Trade Zones (FTZ)--Mersin, Antalya, Aegean, Istanbul and Trabzon--
in Turkey. Another six FTZs are under construction. There are also 20
Organized Industrial Zones throughout the country which offer attractive
conditions for establishing industrial operations.
Free trade zones are completely tax free and foreign-owned firms have
the same investment opportunities and treatment as host country
entities. Trade between FTZ's and Turkey is treated as foreign trade.
The goods brought into the free zones can be sold to Turkey with or
without processing. There are no limitations on the proportion of
foreign capital participation within the FTZ.
Foreign-owned firms can benefit from a number of incentives such as tax
(including income tax on salaries of persons working within the FTZ),
duties and toll exemptions and export treatment of Turkish origin
inputs, etc., both at the investment and production stages.
For further information please contact: General Directorate of Free
Trade Zones, Undersecretariat for Foreign Trade, Inonu Bulvari, Emek,
Ankara.
Tel: (90) 312 - 212 8909, fax: (90) 312 - 212 89 06
CAPITAL OUTFLOW POLICY
Turkish citizens wishing to establish a company, a branch office, or
take part in a joint venture may freely transfer capital abroad below $5
million without permission. Export of capital above $5 million must be
approved by the Undersecretariat of Treasury. Applications for transfer
of over $150 million must be submitted to the Council of Ministers after
preliminary consideration by the Treasury. In June 1995, the Council of
Ministers was examining a new Foreign Capital Decree which would almost
completely abolish controls
on capital flows.
Turkish foreign direct investments in other countries as of December 31,
1993 (please note that the figures may not be reliable because most
Turkish businessmen tend to move money in amounts less than $5 million):
Capital Outflow (USD millions)
COUNTRY OF CUMULATIVE
DESTINATION 1991 1992 1993 TOTAL
UK 6.5 N/A 7.41 38.1
GERMANY 33.0 36.3 10.3 124.1
CIS. 0.3 27.7 76.0 113.5
UNITED STATES 0.6 3.1 3.2 87.5
LUXEMBOURG N/A 10.3 5.0 40.8
NETHERLANDS N/A 10.7 10.7 29.9
SWITZERLAND N/A 2.0 5.3 26.2
AUSTRIA N/A N/A 1.1 20.3
FRANCE 3.8 0.6 3.8 19.8
OTHERS (1) 3.7 4.3 9.9 17.7
TOTAL 47.9 94.9 132.7 659.9(2)
(1): Includes capital outflow to free trade zones as well as to all
other countries.
(2): Total (cumulative) capital outflow from turkey.
Source: General Directorate of Banking and Foreign Exchange, UTFT.
Outward FDI as a Percentage of Turkish GDP
YEAR OUTWARD FDI OUTWARD FDI/GDP
(USD millions) (Percent)
TO 1985 212.2 ---
1990 172.50.11 0.0013
1991 47.90.03 0.0003
1992 94.90.06 0.0007
1993 132.70.08 0.0010
Source: General Directorate of Banking and Foreign Exchange, Treasury,
and State Institute of Statistics (SIS).
FOREIGN DIRECT INVESTMENT STATISTICS
According to statistics provided by the GDFI, as of May 31, 1995, 2948
foreign firms had invested and were operating in Turkey. Total
authorized capital was $14.7 billion and actual inflows reached $7.8
billion (as of March 31, 1995). European Union (EU) countries accounted
for about 61 percent of cumulative foreign investment, OECD countries
accounted for 91 percent. France and the Netherlands are the top
sources of foreign investment, followed by the United States and
Germany. About 57 percent of foreign investment was in manufacturing,
41 percent in services, 1.2 percent in agriculture and 0.75 percent in
mining. Of the foregoing, some of the larger sub-sectors include
financial services (5.66 percent), hotel services (5.58 percent),
banking (9.49 percent), vehicle production (9.29 percent), food
processing (8.58 percent), tobacco products (7.47 percent), construction
(5.58), industrial chemicals, and electronics (3.86 percent).
Total Cumulative Foreign Direct Investment in Turkey by Country of
Origin as of May 31, 1995
COUNTRY NUMBER OF FIRMS PERCENTAGE OF
TOTAL FOREIGN CAPITAL
NETHERLANDS 147 20.62
FRANCE 162 14.94
UNITED STATES 219 11.08
GERMANY 524 10.96
SWITZERLAND 152 7.82
JAPAN 40 6.62
ITALY 117 5.02
UNITED KINGDOM 206 4.67
CANADA 14 3.05
LUXEMBOURG 26 2.77
SAUDI ARABIA 64 2.08
OTHERS 1,277 10.39
TOTAL 2,948 100.00
Source: General Directorate of Foreign Investment, (GDFI), UTFT.
Estimated FDI Stock as of Percentage of Turkish GDP by Country, as of
May 1995
COUNTRY FDI STOCK/GDP
NETHERLANDS 0.0022
FRANCE 0.0017
UNITED STATES 0.0012
GERMANY 0.0012
SWITZERLAND 0.0008
JAPAN 0.0007
UNITED KINGDOM 0.0005
ITALY 0.0005
CANADA 0.0003
SAUDI ARABIA 0.0002
SOURCE: General Directorate of Foreign Investment (GDFI), and the State
Institute of Statistics (SIS).
Foreign Direct Investment by Years (Million, USD)
FDI PERMISSIONS REALIZATIONS ACTUAL
YEAR CUMULATIVE ANNUAL ANNUAL NO OF FIRMS
TO 1988 3,229
1989 4,791 1,512 855 1,525
1990 6,652 1,861 1,005 1,856
1991 8,619 1,967 1,041 2,123
1992 10,439 1,820 1,242 2,330
1993 12,710 2,271 1,016 2,554
1994 14,195 1,485 830 2,830
1994 (A) 14,742 (A) 777 (B) 211 2,948
(A): As of end of May, 1995
(B): As of end of March, 1995
Source: General Directorate of Foreign Investment (GDFI), and the State
Planning Organization (SPO)
Annual FDI Flow as a Percentage of Turkish GDP
FDI FLOW FDI
YEAR (USD, Million) (PCT)
Up to 1988 3,229 ----
1989 855 0.0065
1990 1,005 0.0077
1991 1,041 0.0080
1992 1,242 0.0095
1993 1,016 0.0078
1994 830 0.0063
1995 211(A) 0.0016
(A): As of end of May, 1995
Source: General Directorate of Foreign Investment (GDFI), and the State
Planning Organization (SPO).
MAJOR FOREIGN INVESTORS
To date, many well-known multinational companies have invested in Turkey
including: American Express, Citibank, Chase Manhattan Bank, Chemical
Bank, Bankers' Trust, Banco Di Roma, Dresdner Bank, First National Bank
of Boston, Irving Trust, P.B. International Bank, Saudi American Bank,
AEG, Alcatel, Bayer, Bell Telephone, BMC, Bosch, BP, Bridgestone,
Cargill, Castrol, Ciba-Geigy, Ciment Francais, Club Mediterrane, Coca
Cola, Colgate-Palmolive, Conrad, Daimler-Benz, Du Pont De Nemours, Fiat,
FMC, General Electric, General Motors, Henkel, ITT, Ford Motor Co.,
Lockheed, Gillette, Goodyear, Hilton International, Hoechst, Honda,
Toyota, Mazda, International Harvester, Kumagai Gumi, Man, Mannesman,
McDonald's, Nestle, Mitsui, Mobil, Nabisco, Philips, Philip Morris,
Northern Telecom, Pepsi, Pfizer, Pirelli, Procter and Gamble, Ralston
Purina, Renault, RJR Nabisco, Hoffman-Laroche, Sandoz, Shell, Siemens,
Singer, Thyssen, Tuborg, Unilever, Uniroyal, Volvo and Voyager.
CHAPTER VIII. TRADE AND PROJECT FINANCING
BRIEF DESCRIPTION OF BANKING SYSTEM
One of the main results of the economic stabilization and financial
liberalization measures undertaken by former President Turgut Ozal in
the 1980s was the complete restructuring of the Turkish banking system
along Western lines. Even though still dominated by a few large state
and commercial banks--some 75 percent of all assets are held by six or
seven banks--and suffering from a lack of transparent accounting
practices and credit-rating agencies, the Turkish banking system offers
the same services found in Western Europe in terms of project finance,
letters of credit, and correspondent relationships. There are around 68
banks in Turkey. Twelve of these are investment and development banks,
and 56 are commercial banks. Banks are permitted to engage in regular
banking, securities brokering, and other businesses. U.S. and U.S.-
affiliated banks in Turkey include: Bank of New York, Banker's Trust,
Chase Manhattan, Chemical Bank, Citibank, and Saudi American Bank.
The Istanbul Stock Exchange, formed in 1986, is becoming one of the
major players in the capital market. The Central Bank of the Republic
of Turkey is located in Ankara and is responsible for the integrity of
the banking system. In 1994, the Central Bank of Turkey became an
autonomous body.
The Central Bank of the Turkish Republic supervises bank activities in
order to guarantee that they meet liquidity requirements and operate in
a responsible fashion. While the Central Bank's Bank Supervision
Division acts as the government's supervisory authority, the
Undersecretariat of Treasury is