Legal factors include Discriminatory practices and laws, Cconsumer laws, Anti-trust
laws, harsh Employment
laws and Health and Safety laws. These factors can
affect how a company operates, its costs, and the demand for its products.
Even though the constitutional system of Turkey is based on the equality of all
individuals without discrimination before the law, irrespective of “language,
race, color, gender, political opinion, philosophical belief, religion and
sect, or any such consideration”, there is a slow shift to islamist
nationalism. According to the Gender Gap Index (2015) of World
Economic Forum, Turkey is the130th country out of 145 countries, which means, Turkey which
is the 17th biggest economy in the world ranks among the lowest
countries (last 15th) in terms of gender equality.
of 5 women are exposed to physical and sexual violence at least once in their
NEW TURKISH COMMERCIAL
CODE: BOT Model (Build,Operate,transfer) is adopted to gain a lead in
industrial promotion and investment financing. Key sectors are industry and
services (Tourism) and other promising industries are Chemical,Energy,Automobiles,Privatization
Programmes,etc. New investment incentive schemes are designed to encourage
investments and reduce dependency on the imports of intermediary goods vital to
country’s strategic growth. The Primary Objective is to reduce the Current
Account Deficit, boost Investment support for lesser developed regions, increase
the level of supportive instruments and promote clustering activities and
investment that will create transfer of information and technology. To increase
local and foreign investment, support instruments such as Exemption and refund
of VAT, Exemption of Customs Duty, low levels of interest rate, allowance withholding, reducing income tax, etc
have been provided to the businesses.
Breach of trust laws : Exorbitant fines are imposed by the Turkish Competition
Authority towards undertakings causing breach of trust . This has resulted in awareness
of competition law around the country. The Authority determines
infringements during its investigations. A maximum fine upto 10% of the company’s
previous year’s turnover can be levied. Additionally the aggrieved party may
file a case for damages and the judicial authorities may impose compensations
up to three times the actual damage. In addition, attorneys’ fees, cost of litigation
and/or mandatory expenditures made during the course of the investigations by
the Turkish Competition Authority may compound the litigation fees..
Employment laws: 10.8%
of the labour force is unemployed. Women
constitute 30% and men account for 70% of
the labour force. A whopping 34% worked 50 hours or more- this being the highest
in any OECD nation.
Intellectual Property (IP): IP rights are
territorial in nature. This means that if you are thinking about trading
internationally, then you should consider registering your IP rights in your export
Contract Forms: Turkish importers are prone to use
typically standardized form of contracts in their transactions. Foreign
contracts are seldom accepted for fear that they may be trapped by hidden or unfamiliar
contract stipulations. Special provisions may be added to the contract form. Addition
of special provisions to the contract
form is normally acceptable.
Terms of payment- are normally by letter of credit. Inspection Certificates regarding weight,quality
or quantity of goods– issued by manufacturers or public assessors – are
normally required as part of the process of setting up a letter of credit. If
the goods are discovered not to be in conformity with the certificates after
re-inspection by Turkish inspection authorities, the buyer will either return
the goods to the seller or lodge claims against the seller for compensation on
losses on the strength of inspection at the port of destination. In the case of
heavy equipment imports, Turks often insert a clause in the contract
withholding a portion of the payment – generally 5 to 10% of the total contract
amount – which will be paid only when the equipment is installed and
Resolution of Disputes: In cases of a dispute, a formal
contract must have a provision that the solution must be sought through
friendly consultation. Arbitration is adopted
to settle the dispute, in some cases, although arbitration is not widely used
in Turkey. Litigation is used only as a last resort.
Social factors affecting business include
various cultural aspects and the health consciousness of the country,
population growth rate, age distribution, career attitudes,etc
of Turkey is 76.9 million.It is mandatory for every fit male Turkish citizen, otherwise not barred, to serve in
the military for a period ranging from three weeks to a year, dependent on
education and job location .It is the 2nd largest military force just behind
the US .
Culture: Culture of Turkey sees clear efforts of combining modernization
and westernization into the social fabric while simultaneously trying to retain its traditional, religious and
historical values. This results in a chaotic cultural identity and a constant
bridging of unequal ethics and sensibilities.
Foreign Relations: Turkey
is not part of EU yet but has formed a customs union for industrial products
and processed agro products (Common external tariff, elimination of all customs
duties i.e a drop from 10% customs duty to 0). It is EU’s 4th largest export
market and 5th largest provider of imports. Turkey is also EU’s #1
export (44%) import (38%) partner. Turkey is the 2nd largest
recipient of FDI in West Asia behind Israel. Turkey reached record high 22 bn
USD in 2007. FDI flows to Turkey decreased to 17.5 bn in 2015 and 12.1 bn in
2016 according to the Turkish Ministry of Economy. Turkey has signed bilateral
agreements with 81 countries.
Factors Hindering FDI:
instability (Attempted coup in 2016),weak Currency, Inflation and Proximity to
conflicts in Middle East. According
to 2016 Global Peace Index, Turkey ranked 145th out of 163 countries in the
world, mainly because of its conflict with Kurdish insurgents, its invasion of
Cyprus and the military intervention in Syria. Minority groups other than the
three religious minorities recognized in the Treaty of Lausanne (Armenians,
Greeks and Jews) do not have any official rights. According to the
latest sources by Ipsos in 2016 Islam was the major religion in Turkey
comprising 82% of the total population, followed by the unaffiliated people who
comprised 13% of the population and Christianity with 2%.
Social fabric: With a change in
leadership Turkey has gradually shifted from Mustafa Kemal Pasha’s secular
tradition to an Islamic nationalism.
Turkey often fails to notify WTO about
non tariff barriers(Implementation of Reference Price Systems, New document
requirements, lengthy inspections). Agro trade is subject to tariff quotas and
price regulations. The Turkish Procurement system is prone to opaque and lengthy
Measures undertaken by
Turkey to increase local and foreign investment:Series of legislative reforms
to facilitate foreign investment, creation of ISPAT(Investment Support and
Promotion Agency),FDI inflows improved in light of the development of pub-pvt
partnership for major infrastructure projects, structural reforms in banking
and finance sectors, robust growth rates, measures to streamline admin
procedures and strengthen intellectual property protection, end of FDI
screening and structural reforms carried out as EU ascension project.
Govt. can jail citizens
that question the govt. or openly support the Kurds which has led to a high
level of self- censorship. Turkey ranks 154th out of 179 countries
in the World Press Freedom Index. Turkey under Tayyip Erdo?an and the AKP has
been described as becoming increasingly authoritarian.
Human Rights- Freedom
to life, life free from torture, Kurdish rights, women’s rights, LGBT rights,
and press freedom, have also attracted controversy. Turkey’s human rights
record continues to be a significant obstacle to future membership in the
AKP govt is
accused of the world’s biggest crackdown on media freedom. Large number of
journalists have been arrested using charges of “terrorism” and
“anti-state activities, on charges of “denigrating Turkishness”
or “insulting Islam” in an effort to sow self-censorship.
As of 2017, the CPJ
identified 81 jailed journalists in Turkey.
In reaction to the failed coup d’état on 15
July 2016, over 125,000 judges, teachers, police and civil servants have been
suspended or dismissed, 36,000 have been formally arrested, and 130 media
organisations, including 16 television broadcasters and 45 newspapers, have
been closed by the government of Turkey.
Turkey’s judicial system has been wholly integrated with the
system as that of continental Europe. In the years of government by the AKP and
Tayyip Erdo?an, particularly since 2013, the independence and integrity of the
Turkish judiciary has been questioned by institutions, parliamentarians and
journalists both within and outside of Turkey; due to political interference in
the promotion of judges and prosecutors, and in their pursuit of public
Challenges to doing business in Turkey: social and
Bribery and Corruption: Anyone doing business in Turkey is likely to
encounter or hear of corruption in one form or another, although the level of
corruption varies according to sector, type of business and region. However,
the general perception is that the situation is improving. The OECD (Organisation for Economic
Co-operation & Development) has assessed Turkey to have made significant
progress since 2007 in its efforts to combat bribery in international business
deals by fully implementing all but one of the recommendations of the OECD’s
Working Group on Bribery. However, the Turkish media has reported that a
significant number of Turks believe bribery and fraud to be common in Turkey.
Terrorism: There is a threat from terrorism within
Turkey and a number of terrorist groups remain active in the country. The main
terrorist group operating in Turkey is the separatist Kurdistan Workers Party
(PKK). Street robbery, burgularies and pick-pocketing are common.
Organised Crime: The main organised crime threat in
Turkey relates to the trade in narcotics. Turkey remains a key transit country
for heroin destined for Western Europe from Afghanistan. With the growth of the
Turkish economy, Turkey may also find itself becoming more attractive as a
destination country for Organised Immigration Crime.