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Executive Summary

Turkey has been an appealing market for investors for most of the last fifteen years. It experienced strong economic growth on the back of the many positive economic and banking reforms it implemented between 2002 and 2007. After the global economic crisis of 2007, Turkey continued to attract substantial investment as a relatively stable emerging market with a promising trajectory of reforms and a strong banking system. Over the last six years, however, economic and democratic reforms have stalled and in some cases regressed. From 2011 growth slowed, falling to 3.2 percent in 2016. It rebounded, however, to 7.4 percent in 2017 due mainly to government stimulus. Despite the growth rebound, government economic policymaking remains opaque, erratic, and politicized, contributing to double-digit inflation and unemployment, and a currency that continues to hit new lows against the dollar. This, combined with the ongoing state of emergency and record debt levels, makes foreign investors cautious, leading to historically low levels of foreign direct investment (FDI). Despite such high 2017 growth numbers, Turkey is expected to grow 4-4.5 percent in 2018 and 2019, below government targets of 5.5 percent.

The Turkish market is generally under-penetrated by U.S. businesses and presents many investment opportunities due to its economic fundamentals and strong conglomerates, although its investment climate is increasingly mixed. Some established U.S. companies recently increased investments in Turkey in the technology, consumer goods, and aerospace sectors. However, due to economic challenges and lack of predictability on the security and political front, many existing firms slowed new investments, and only a few new firms entered the market in 2017. The most positive aspects of Turkey’s investment climate are its favorable demographics and prime geographical position, providing access to multiple regional markets. Turkey is also an island of relative stability and growth in a turbulent region, making it desirable for regional operations. Turkey also has a relatively educated work force, developed infrastructure, and a resilient consumption-based economy.

The most negative aspects of Turkey’s investment climate are geopolitical risk and widespread concern over the deterioration of the rule of law and security environment. Many observers remain concerned about transparency, corruption, and reduced judicial independence. In the past few years, especially after the July 2016 coup attempt, the government has marginalized critics, confiscated over 1,000 companies worth more than USD10 billion, and purged over 113,000 civil servants, often on terrorism-related charges. The political focus on transitioning to a presidential system, renewed questions over the future of EU-Turkey relations, security concerns and cross-border military operations, and the indefinite state of emergency may negatively affect consumer confidence and investor spending going forward.

Turkey’s willingness to make progress on needed structural economic reforms will remain key for the country. Government officials will need to make difficult political choices to liberalize the market to align with the goal of modernizing Turkey’s EU Customs Union agreement, itself impacted by worsening relations with the EU. The government’s push to require manufacturing and data localization in many sectors is also impacting foreign investment into the country. Other issues of import include tax reform and the decreasing independence of the courts and the Central Bank. Turkey’s hosting of three million refugees and political tensions with other countries will also create additional economic burdens on the country.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 81 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2017 60 of 190
Global Innovation Index 2017 43 of 127
U.S. FDI in Partner Country (M USD, stock positions) 2016 USD 3,100
World Bank GNI per capita 2016 USD 11,230

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Turkey acknowledges that it needs to attract significant new foreign direct investment (FDI) to meet its ambitious development goals, as well as finance its current account deficit. As a result, Turkey has one of the most liberal legal regimes for FDI in the Organization for Economic Cooperation and Development (OECD). According to the Central Bank of Turkey, Balance of Payments, Turkey attracted USD 7.4 billion of FDI in 2017, slightly down from USD 7.5 billion in 2016. U.S. FDI to Turkey was USD 162 million in 2017, down from USD 338 million in 2016. In order to attract more FDI, Turkey needs to better enforce international trade rules, ensure the transparency and timely execution of judicial orders, increase engagement with foreign investors on policy issues, and pursue policies to promote strong, sustainable, and balanced growth. It also needs to lift the state of emergency and take other political measures to increase stability and predictability for investors. A stable banking sector, tight fiscal controls, efforts to reduce the size of the informal economy, increasing flexibility of the labor market, improving labor skills, and continuing privatization of state economic enterprises have the potential to improve the investment environment in Turkey.

Most sectors open to the Turkish private sector are also open to foreign participation and investment. All investors, regardless of nationality, face some challenges: excessive bureaucracy, a slow judicial system, high and inconsistently applied taxes, weaknesses in corporate governance, unpredictable decisions made at the local government level, and frequent changes in the legal and regulatory environment, especially given the ongoing state of emergency. Structural reforms that will create a more transparent, equal, fair, and modern investment and business environment remain stalled. Venture capital and angel investing are still relatively new in Turkey, but legislation should continue to facilitate greater development of these financing opportunities.

Turkey does not screen, review, or approve FDI specifically. However, the government established regulatory and supervisory authorities to regulate different types of markets. Important regulators in Turkey include the Competition Authority; Energy Market Regulation Authority; Banking Regulation and Supervision Authority; Information and Communication Technologies Authority; Tobacco, Tobacco Products and Alcoholic Beverages Market Regulation Board; Privatization Administration; Public Procurement Authority; Radio and Television Supreme Council; and Public Oversight, Accounting and Auditing Standards Authority. Some of the aforementioned authorities screen as needed without discrimination, primarily for tax audits. Screening mechanisms are executed to maintain fair competition and for other economic benefits. If an investment fails a review, possible outcomes can vary from a notice to remedy, which allows for a specific period of time to correct the problem, to penalty fees. The Turkish judicial system allows for appeals of any administrative decision, including tax courts that deal with tax disputes.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no general limits on foreign ownership or control, though in some sectors, such as pharmaceuticals, there is strong pressure to partner with local firms as a requirement for market access. In many areas Turkey’s regulatory environment is business-friendly. Investors can establish a business in Turkey irrespective of nationality or place of residence. There are no sector-specific restrictions that discriminate against market access, which are prohibited by WTO Regulations. However, there is increasing pressure in some sectors to partner with local companies and transfer technology, and some discriminatory barriers to foreign entrants, such as on the basis of “anti-competitive practices,” especially in the ICT sector.

Other Investment Policy Reviews

In recent years, Turkey has not conducted an investment policy review through the OECD. Turkey’s last investment policy review through the World Trade Organization (WTO) was conducted on March 15 and 17, 2016. Turkey has not conducted an investment policy review through the United Nations Conference on Trade and Development (UNCTAD). Turkey has cooperated with the World Bank to produce several reports on the general investment climate that can be found at: .

Business Facilitation

The Republic of Turkey Prime Ministry Investment Support and Promotion Agency (ISPAT) is the official organization for promoting Turkey’s investment opportunities to the global business community and assisting investors before, during, and after their entry into Turkey. Its web site is the hub where both foreigners and locals can register their businesses. It is clear and easy to use, with information about legislation and company establishment. (

The conditions for setting up a business and share transfer are the same as those applied to local investors. International investors may establish any form of company set out in the Turkish Commercial Code (TCC), which offers a corporate governance approach that meets international standards, fosters private equity and public offering activities, creates transparency in managing operations, and aligns the Turkish business environment with EU legislation as well as with the EU accession process.

Turkey defines micro, small, and medium-sized enterprises according to Decision No. 2012/3834 of the Official Gazette dated November 4, 2012:

Micro-sized enterprises: Less than 10 employees annually and less than 1 million Turkish lira in net annual sales or financial statement.

Small-sized enterprises: Less than 50 employees annually and less than 8 million Turkish lira in net annual sales or financial statement.

Medium-sized enterprises: Less than 250 employees annually and less than 40 million Turkish lira in net annual sales or financial statement.

Outward Investment

The government promotes outward investment via investment promotion agencies and other platforms. It does not restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation Treaties

Since 1962, Turkey has negotiated and signed agreements for the reciprocal promotion and protection of investments. As of 2017, Turkey has 75 bilateral investment agreements in force with: Afghanistan, Albania, Argentina, Austria, Australia, Azerbaijan, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cuba, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, Oman, Saudi Arabia, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkmenistan, United Arab Emirates, United Kingdom, United States, Ukraine, Uzbekistan, and Yemen.

Bilateral Taxation Treaties

Turkey has a bilateral taxation treaty with the United States.

3. Legal Regime

Transparency of the Regulatory System

The GOT has adopted policies and laws that, in principle, should foster competition and transparency. Accounting, legal, and regulatory procedures appear to be consistent with international norms, including standards set forth by the International Financial Reporting Standards (IFRS), the EU, and the OECD. Publicly traded companies adhere to international accounting standards and are audited by well-respected international firms. Copies of draft bills are generally made available to the public by posting them to the websites of the relevant ministry, Parliament, or Official Gazette. Foreign companies in several sectors, however, claim that regulations are applied in a nontransparent manner, especially under the ongoing state of emergency, which grants the government extraordinary powers. In particular, public tender decisions and regulatory updates can be opaque and politically driven.

International Regulatory Considerations

Turkey is a candidate for membership in the EU; however, the accession process has stalled, with the opening of new accession chapters put on hold. Some, though not all, Turkish regulations have been harmonized with the EU, and the country has adopted many European regulatory norms and standards. Turkey is a member of the WTO, though it does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Turkey’s legal system is based on civil law, and provides means for enforcing property and contractual rights, and there are written commercial and bankruptcy laws. Turkey’s court system, however, is overburdened, which sometimes results in slow decisions and judges lacking sufficient time to grasp complex issues. Judgments of foreign courts, under certain circumstances, need to be upheld by local courts before they are accepted and enforced. Recent developments reinforce the Turkish judicial system’s need to undertake significant reforms to adopt fair, democratic, and unbiased standards. Worsening rule of law and the GOT’s attempts to control court rulings are especially worrisome. Court cases in theory are open to the public, though under the state of emergency more cases are now restricted.

Laws and Regulations on Foreign Direct Investment

Turkey’s investment legislation is simple and complies with international standards, offering equal treatment for all investors. The New Turkish Commercial Code No. 6102 (“New TCC”) was published in the Official Gazette on February 14, 2011. The backbone of the investment legislation is made up of the Encouragement of Investments and Employment Law No. 5084, Foreign Direct Investments Law No. 4875, international treaties and various laws and related sub-regulations on the promotion of sectorial investments. Regulations related to M&A include: 1) Turkish Code of Obligations: Article 202 and Article 203, b) Turkish Commercial Code: Articles 134-158, c) Execution and Bankruptcy Law: Article 280, d) Law on the Procedures for the Collection of Public Receivables: Article 30, and e) Law on Competition: Article 7. The government’s primary website for investors is .

Although most U.S. investors have not been directly affected to date, there is an increased perception that the government is willing to use its executive authority to interfere in the court system in ways that could affect foreign investors, to include favoring domestic companies.

Competition and Anti-Trust Laws

The Competition Authority is the sole authority on competition issues in Turkey and handles private sector transactions. ( ). Public institutions are exempt from its authority. The Constitutional Court can overrule the Competition Authority’s finding of innocence in a competition case, as recently happened with an American firm. There have been some cases of Turkish courts blocking foreign company operations on the basis of anti-competitive claims. Such cases can take over a year to resolve, during which time the companies can be prohibited from doing business in Turkey, benefitting their (local) competitors.

Expropriation and Compensation

Under the U.S.-Turkey BIT, expropriation can only occur in accordance with due process of law, can only be for a public purpose, and must be non-discriminatory. Compensation must be prompt, adequate, and effective. The GOT occasionally expropriates private real property for public works or for state industrial projects. The GOT agency expropriating the property negotiates the purchase price. If the owners of the property do not agree with the proposed price, they are able to challenge the expropriation in court and ask for additional compensation. There are no known outstanding expropriation or nationalization cases for U.S. firms. Although there is not a pattern of discrimination against U.S. firms, the GOT aggressively targeted businesses, banks, media outlets, and mining and energy companies with alleged ties to the outlawed “Fethullah Gulen Terrorist Organization (FETO)” and/or the July 2016 attempted coup, including the expropriation of over 1,000 private companies worth more than USD 10.7 billion.

Dispute Settlement

ICSID Convention and New York Convention

Turkey is a member of the International Center for the Settlement of Investment Disputes (ICSID) and is a signatory of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Turkey ratified the Convention of the Multinational Investment Guarantee Agency (MIGA) in 1987. There are no known arbitration cases involving a U.S. company pending before ICSID. Foreign arbitral awards will be enforced if the country of origin of the award is a New York Convention state, if the dispute is commercial under Turkish law, and as long as none of the grounds under article V of the New York Convention are proved by the opposing party.

Investor-State Dispute Settlement

The U.S.-Turkey BIT ensures that U.S. investors have full access to Turkey’s local courts 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. There is limited data about investment disputes available to the Embassy economic team, with only a handful of known cases. Over the last 15 years, the government has a mixed record of handling investment disputes through international arbitration, with one case resulting in a USD30 million payment and the other resulting in no payment.

International Commercial Arbitration and Foreign Courts

Turkey adopted the International Arbitration Law, based on the UNCITRAL model law, in 2001. Local courts accept binding international arbitration of investment disputes between foreign investors and the state. In practice, however, Turkish courts have sometimes failed to uphold an international arbitration ruling involving private companies and have favored Turkish firms. The GOT has also recently refused to allow arbitration in cases involving public tenders, which has caused problems for some firms. There are two main arbitration bodies in Turkey: the Union of Chambers and Commodity Exchanges of Turkey ( ) and the Istanbul Chamber of Commerce ( ). Most commercial disputes can be settled through arbitration, including disputes regarding public services. Parties decide the arbitration procedure, set the arbitration rules, and select the language of the proceedings. The Istanbul Arbitration Center was established in October 2015 as an independent, neutral, and impartial institution to mediate both domestic and international disputes through fast track arbitration, emergency arbitrator, and appointments for ad hoc procedures. Its decisions are binding and subject to international enforcement. ( )

Bankruptcy Regulations

Turkey criminalizes bankruptcy and has a bankruptcy law based on the Execution and Bankruptcy Code No. 2004 (the “EBL”), published in the Official Gazette on June 19, 1932 and numbered 2128. The World Bank’s Doing Business Report gave Turkey a rank of 113 out of 190 countries for ease of resolving insolvency. ( )

4. Industrial Policies

Investment Incentives

Turkey’s regional incentives program divides various regions of the country into one of six different zones, providing the following benefits to investors: corporate tax privilege; customs tax exemption; Value Added Tax (VAT) exemption; employer’s share insurance contributions support; allocation of investment locations; income tax withholding support; land allocation; and government support for credit interests. The program was launched in 2012 and more detailed information can be found at the Ministry of Economy’s incentives website: 

The incentives program gives priority to high-tech, high-value-added, globally competitive sectors and includes regional incentive programs to reduce regional economic disparities and increase competitiveness. The new investment incentives’ “tiered” system provides greater incentives to invest in less developed parts of the country, and is designed to encourage investments with the potential to reduce dependency on the importation of intermediate goods seen as vital to the country’s strategic sectors. Other primary objectives are to reduce the current account deficit and unemployment, increase the level of support instruments, promote clustering activities, and support investments to promote technology transfer. The map and explanation of the program can be found at:  or .

Foreign firms are eligible for research and development (R&D) incentives if the R&D is conducted in Turkey. However, investors, especially in the technology sector, say that Turkey has a retrograde brick-and-mortar definition of R&D that overlooks other types of R&D investments (such as in internet platform technologies). Turkey pays close attention to the impact that micro-economic factors have on business development and growth, and is seeking to foster entrepreneurship and small and medium-sized enterprises (SMEs). Through the Small and Medium Enterprises Development Organization (KOSGEB), the Turkish Government provides various incentives for innovative ideas and cutting-edge technologies, in addition to providing SMEs easier access to medium and long-term funds. There are also a number of technology development zones (TDZs) in Turkey where entrepreneurs are given assistance in commercializing business ideas. The Turkish Government provides support to TDZs, including infrastructure and facilities, exemption from income and corporate taxes for profits derived from software and R&D activities, exemption from all taxes for the wages of researchers, software, and R&D personnel employed within the TDZVAT, corporate tax exemptions for IT-specific sectors, and customs and duties exemptions.

Turkey’s Scientific and Technological Research Council (TUBITAK) has special programs for entrepreneurs in the technology sector, and the Turkish Technology Development Foundation (TTGV) has programs that provide capital loans for R&D projects and/or cover R&D-related expenses. Projects eligible for such incentives include concept development, technological research, technical feasibility research, laboratory studies to transform concept into design, design and sketching studies, prototype production, construction of pilot facilities, test production, patent and license studies, and activities related to post-scale problems stemming from product design. TUBITAK also has a Technology Transfer Office Support Program, which provides grants to establish Technology Transfer Offices (TTO) in Turkey.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no restrictions on foreign firms operating in any of Turkey’s 20 free zones. The zones are open to a wide range of activities, including manufacturing, storage, packaging, trading, banking, and insurance. Foreign products enter and leave the free zones without payment of customs or duties if products are exported to third country markets. Income generated in the zones is exempt from corporate and individual income taxation and from the value-added tax, but firms are required to make social security contributions for their employees. Additionally, standardization regulations in Turkey do not apply to the activities in the free zones, unless the products are imported into Turkey. Sales to the Turkish domestic market are allowed with goods and revenues transported from the zones into Turkey subject to all relevant import regulations.

Taxpayers who possessed an operating license as of February 6, 2004, do not have to pay income or corporate tax on their earnings in free zones for the duration of their license. Earnings based on the sale of goods manufactured in free zones are exempt from income and corporate tax until the end of the year in which Turkey becomes a member of the European Union. Earnings secured in a free zone under corporate tax immunity and paid as dividends to real person shareholders in Turkey, or to real person or legal-entity shareholders abroad, are subject to 10 percent withholding tax. See the Ministry of Economy’s website: .

Performance and Data Localization Requirements

The government mandates a local employment ratio of ten Turks per foreign worker. These schemes do not apply equally to senior management and boards of directors, but their numbers are included in the overall local employment calculations. Foreign legal firms are forbidden from working in Turkey except as consultants; they cannot directly represent clients and must partner with a local law firm. There are no onerous visa, residence, work permits or similar requirements inhibiting mobility of foreign investors and their employees. There are no known government-imposed conditions on permissions to invest, including tariff and non-tariff barriers.

There are no performance requirements imposed as a condition for establishing, maintaining, or expanding investment in Turkey. GOT requirements for disclosure of proprietary information as part of the regulatory approval process are consistent with internationally accepted practices, though some companies, especially in the pharmaceutical sector, worry about data protection during the regulatory review process. Enterprises with foreign capital must send their activity report submitted to shareholders, their auditor’s report, and their balance sheets to the Turkish Treasury’s Foreign Investment Directorate every year by May. Turkey grants most rights, incentives, exemptions, and privileges available to national businesses to foreign business on a most-favored-nation (MFN) basis. U.S. and other foreign firms can participate in government-financed and/or subsidized research and development programs on a national treatment basis.

Offsets are an important aspect of Turkey’s military procurement, and increasingly in other sectors, and such guidelines have been modified to encourage direct investment and technology transfer. The GOT is targeting the energy, transportation, medical devices, and telecom sectors for the usage of offsets. In February 2014, Parliament passed legislation requiring the Ministry of Science, Industry, and Technology (MSIT) to establish a framework to incorporate civilian offsets into large government procurement contracts. The Ministry of Health (MOH) established an office to examine how offsets could be incorporated into new contracts. The law suggests that for public contracts above USD5 million, companies must invest up to 50 percent of contract value in Turkey and “add value” to the sector. In general, labor, health and safety laws do not distort or impede investment, although legal restrictions on discharging employees may provide a disincentive to labor-intensive activity in the formal economy.

Recent laws targeting the ICT sector have increased regulations on data, online broadcasting, tax collection, and payment platforms. In particular, ICT and other companies report GOT pressure to localize data, which they view as a precursor to greater GOT access to user information and source code. The recently amended Law #6493 on Payment and Security Systems, Payment Services and e-money Institutions, also requires financial institutions to establish servers in Turkey in order to localize data. Turkish Banking Regulation and Supervision Board (BDDK) is the authority that issues business licenses as long as companies 1) localize their IT systems in Turkey, and 2) keep the original data, not copies, in Turkey. Regulations on data localization, internet content, and taxation/licensing resulted in the departure of several U.S. tech companies from the Turkish market, and has chilled investment by other possible entrants to the e-commerce and e-payments sectors. The new laws potentially affect all companies that collect private user data, such as payment information provided online for a consumer purchase.

Turkey enacted a new law on Personal Data Protection in April 2016. The law regulates all operations performed upon personal data including obtaining, recording, storage, and transfer to third parties or abroad. For all data previously processed before the law went into effect, there will be a two-year transition period. After two years, all data will either be rendered compliant with new legislation requirements, erased, or anonymized. All businesses are urged to assess how they currently collect and store data to determine vulnerabilities and risks in regard to legal obligations. The law created the new Data Protection Authority, which is charged with monitoring and enforcing corporate data use.

5. Protection of Property Rights

Real Property

Secured interests in property, both movable and real, are recognized and enforced, and there is a reliable system of recording such security interests. For example, there is a land registry office where real estate is registered. Turkey’s legal system protects and facilitates acquisition and disposal of property rights, including land, buildings, and mortgages, although some parties have complained that the courts are slow to render decisions and are susceptible to external influence. However, following the coup attempt, the GOT confiscated over 1,000 companies as well as significant real estate holdings for alleged terrorist ties. Although the seizures did not directly impact many foreign firms, it nonetheless raises investor concerns about private property protections under the continuing state of emergency.

The Ministry of Environment and Urbanization enacted a law on title-deed registration in 2012 removing the previous requirement that foreign purchasers of real estate in Turkey had to be in partnership with a Turkish individual or company that owns at least a 50-percent share in the property, meaning foreigners can now own their own land. The law is also much more flexible in allowing international companies to purchase real property. The new law also increases the upper limit on real estate purchases by foreign individuals to 30 hectares and allows further increases up to 60 hectares with permission from the Council of Ministers. To ensure that land has a clear title, interested parties may inquire through the General Directorate of Land and Cadastre ( ).

Intellectual Property Rights

In 2017 Turkey continued implementation of its Intellectual Property Rights (IPR) law, the first in modern Turkey’s history, and an important step forward in the country’s IPR development. The law brings together a series of “decrees” into a single, unified, modernized legal structure. It also greatly increases the capacity of the country’s patent office, and improves the framework for commercialization and technology transfer. Turkey also prepared draft legislation on a new Copyright Law. However, while legislative frameworks are improving, IP enforcement remains lackluster. Turkey remains on the Special 301 Watch List for 2018. Concerns remain about policies requiring local production of pharmaceuticals, inadequate protection of test data, and a lack of transparency in national pricing and reimbursement. IPR enforcement suffers from a lack of awareness and training among judges and officers, as well as a lack of prioritization relative to terrorism and other concerns. Law enforcement officers also do not have ex officio authority to seize and destroy counterfeit goods, which are prevalent in the local market. Software piracy is also high.

Additionally, the practice of issuing search-and-seizure warrants varies considerably. IP courts and specialized IP judges only exist in major cities. Outside these areas, the application for a search warrant must be filed at a regular criminal court (Court of Peace) and/or with a regular prosecutor. The Courts of Peace are very reluctant to issue search warrants. Although, by law, “reasonable doubt” is adequate grounds for issuing a search-and-seizure order, judges often set additional requirements, including supporting documentation, photographs, and even witness testimony, which risk exposing companies’ intelligence sources. In some regions, Courts of Peace judges rarely grant search warrants, for example in popular tourist destinations. Overall, according to some investors, it is difficult to protect their rights and general IPR enforcement is deteriorating. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at .

6. Financial Sector

Capital Markets and Portfolio Investment

The Turkish Government strongly encourages and offers an effective regulatory system to facilitate portfolio investment. There is sufficient liquidity in the markets to enter and exit sizeable positions. Existing policies facilitate the free flow of financial resources into the product and factor markets. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is generally allocated on market terms, though the GOT has increased low- and no-interest loans for certain parties, and pressured public banks to increase their lending, especially for public projects and electoral priorities. Foreign investors are able to get credit on the local market. The private sector has access to a variety of credit instruments.

Money and Banking System

The Turkish banking sector, a central bank system, is relatively healthy. The estimated total assets of the country’s largest banks are as follows: Ziraat Bankasi A.S. USD 107.42 billion, Is Bankasi – USD 95.91 billion, Garanti – USD 81.85 billion, Akbank USD 77.12, Halk Bankasi USD 73.61. According to the Banking Regulation and Supervision Agency (BDDK), the share of non-performing loans in the sector was approximately 3.05 percent as of September 2017. The only requirements for a foreigner to open a bank account in Turkey are a passport copy and either an ID number from the Ministry of Foreign Affairs or a Turkish Tax ID number. The Turkish Government adopted a framework Capital Markets Law in 2012, aimed at bringing greater corporate accountability, protection of minority-shareholders, and financial statement transparency.

The independent Banking and Regulation Supervision Agency (BRSA) monitors and supervises Turkey’s banks. BRSA is headed by a board whose seven members are appointed for six-year terms. Bank deposits are protected by an independent deposit insurance agency, the State Deposit Insurance Fund (SDIF). Because of historically high local borrowing costs and short repayment periods, foreign and local firms frequently seek credit from international markets to finance their activities. Foreign banks are allowed to establish operations in the country.

Foreign Exchange and Remittances

Foreign Exchange Policies

Turkish law guarantees the free transfer of profits, fees, and royalties, and repatriation of capital. This guarantee is reflected in Turkey’s 1990 Bilateral Investment Treaty (BIT) with the United States, which mandates unrestricted and prompt transfer in a freely-usable currency at a legal market-clearing rate for all investment-related funds. There is little difficulty in obtaining foreign exchange, and there are no foreign-exchange restrictions, though in 2017, the GOT continued to pressure businesses to conduct trade in lira to prevent further currency depreciation. Funds associated with any form of investment can be freely converted into any world currency; however, the GOT recently took measures to prevent individuals from trading currency on many international Forex websites. The exchange rate is determined by a free-floating exchange rate, though in 2017, the GOT repeatedly took measures to stabilize the depreciating lira.

Remittance Policies

In Turkey, there have been no recent changes or plans to change investment remittance policies, and indeed the GOT in 2017 actively encouraged the repatriation of funds. There are also no time limitations on remittances. Waiting periods for dividends, return on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees do not exceed 60 days. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue

Sovereign Wealth Funds

The GOT announced the creation of a sovereign wealth fund (SWF) in August 2016. The controversial fund consists of shares of state owned enterprises (SOEs) and is designed to serve as collateral for raising foreign financing. In February 2017, several leading SOEs, such as Turkish Airlines and Ziraat Bank, were transferred to the SWF. Critics worry management of the fund is opaque and politicized.

7. State-Owned Enterprises

As of 2017, the sectors with active SOEs include mining, banking, telecom, and transportation. The full list can be found here: . Allegations of unfair practices by SOEs are minimal, and the Embassy is not aware of any ongoing complaints by U.S. firms. Turkey is not a country party to the World Trade Organization’s Government Procurement Agreement. Turkey is a member of the OECD Working Party on State Ownership and Privatization Practices, and OECD’s compliance regulations and new laws enacted in 2012 by the Turkish Competitive Authority closely govern SOE operations. In 2015 at the Antalya Leaders’ Summit, G20 Leaders endorsed the new global standard on corporate governance which will help policymakers evaluate and improve their national corporate governance frameworks with a view to promote market-based financing and to boost long-term investment. The G20/OECD Principles of Corporate Governance represent a shared understanding with respect to corporate governance standards and practices in areas such as transparency, disclosure, accountability, board oversight, shareholder rights and the role of key stakeholders. They also provide recommendations for national policymakers on executive remuneration, the behavior of institutional investors and how stock markets should function.

Privatization Program

The GOT has continued to make progress on privatization over the last decade. Of 272 companies the state once owned, 54 are fully privatized. Transactions completed under the Turkish privatization program generated USD 2.4 billion in 2017. The Turkish government says it is committed to continuing the privatization process despite the contraction in global capital flows. However, other measures, such as the creation of a SWF with control over major state-owned enterprises, suggests that the government sees greater benefit in using some public assets to raise additional debt rather than privatizing them. Accordingly, the GOT has shelved plans to increase privatization of Turkish Airlines and instead moved them and other SOEs into the SWF. More information about privatization initiatives can be found at the Prime Ministry’s Privatization Administration’s website at: .

8. Responsible Business Conduct

In Turkey, responsible business conduct (RBC) is gaining traction and more is being expected of companies. Reforms carried out as part of the EU harmonization process have had a positive effect on laws governing Turkish associations, especially non-governmental organizations (NGOs). However, democratic backsliding under the state of emergency has increased pressure on civil society. Turkey has not yet established a central coordinating office or information agency to assist companies in their efforts, and the topic of RBC is handled by the various ministries. Some U.S. companies have targeted RBC activities towards improving education in Turkey.

NGOs that are active in the economic sector, such as the Turkish Union of Chambers and Commodity Exchanges (TOBB) and the Turkish Industrialists’ and Businessmen’s Association (TÜSIAD), issue regular reports and studies, and hold events aimed at encouraging Turkish companies to become involved in policy issues. In addition to influencing the political process, these two NGOs also assist their members with civic engagement. The Business Council for Sustainable Development Turkey ( ) and the Corporate Social Responsibility Association in Turkey ( ), founded in 2005, are two associations devoted exclusively to issues of responsible business conduct. The Turkish Ethical Values Center Foundation ( ), the Private Sector Volunteers Association ( ) and the Third Sector Foundation of Turkey ( ) also play an important role.

9. Corruption

Corruption remains a serious concern, a reality reflected in Turkey’s sliding score in recent years in Transparency International’s annual Corruption Perceptions Index, where it ranked 81 of 180 countries and territories around the world in 2017. Government mechanisms to investigate and punish alleged abuse and corruption by state officials remained inadequate, and impunity remained a problem. Though independent in principle, the judiciary remained prone to government, and particularly executive branch, interference, including with respect to the investigation and prosecution of major corruption cases. In some cases, the state of emergency amplified pre-existing concerns about judicial independence. (See the Department of State’s annual Country Reports on Human Rights Practices for more details.) The government does not actively encourage private companies to establish internal codes of conduct that prohibit bribery of public officials. Turkey is a participant in regional anti-corruption initiatives, specifically co-heading the G20 Anti-Corruption working group with the United States. Locally, the Prime Ministry Inspection Board and other state institutions are responsible for combating corruption.

Public procurement reforms were designed in Turkey to make procurement more transparent and less susceptible to political interference, including through the establishment of an independent public procurement board with the power to void contracts. Critics claim, however, that government officials have continued to award large contracts to firms friendly with the ruling Justice and Development Party (AKP), especially for large public construction projects.

Turkish legislation outlaws bribery, but enforcement is uneven. Turkey’s Criminal Code makes it unlawful to promise or to give any advantage to foreign government officials in exchange for their assistance in providing improper advantage in the conduct of international business.

The provisions of the Criminal Law regarding bribing of foreign government officials are consistent with the provisions of the Foreign Corrupt Practices Act of 1977 of the United States (FCPA). There are, however, a number of differences between Turkish law and the FCPA. For example, there is no exception under Turkish law for payments to facilitate or expedite performance of a “routine governmental action” in terms of the FCPA. Another difference is that the FCPA does not provide for punishment by imprisonment, while Turkish law provides for punishment by imprisonment from four to 12 years. The Prime Ministry’s Inspection Board, which advises the Corruption Investigations Committee, is responsible for investigating major corruption cases brought to its attention by the Committee. Nearly every state agency has its own inspector corps responsible for investigating internal corruption. The Parliament can establish investigative commissions to examine corruption allegations concerning cabinet ministers; a majority vote is needed to send these cases to the Supreme Court for further action.

Turkey ratified the OECD Convention on Combating Bribery of Public Officials and passed implementing legislation in 2003 to provide that bribes of foreign, as well as domestic, officials are illegal. In 2006, Turkey’s Parliament ratified the UN Convention against Corruption.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Prime Ministry Inspection Board
Basbakanlik Merkez Bina Zemin Kat No:11 Bakanliklar/ANKARA
Phone : +90 312 422 24 00
Fax : +90 312 422 24 99

Contact at “watchdog” organization:

Seref Malkoc
Chief Ombudsman
The Ombudsman Institution
Kavaklidere Mah. Nevzat Tandogan Caddesi No:4 Cankaya ANKARA
+90 312 465 22 00

10. Political and Security Environment

Turkey experiences politically motivated violence, ranging from police response to civil demonstrations to unidentified attacks on opposition-party offices. In July 2016, an attempted coup resulted in the death of more than 240 people, and injured over 2,100 others. Since the July 2015 collapse of the cessation of hostilities between the government and the Kurdistan Workers’ Party (PKK) [also operating as the Kurdistan People’s Congress (KCK), Kongra Gel (KGK), or via splinter groups like the Kurdistan Freedom Hawks (TAK)], PKK terrorist attacks and violence between government security forces and the PKK have claimed the lives of hundreds of civilians and security forces.

Other U.S.-designated terrorist organizations such as Islamic State of Iraq and Syria (ISIS), the indigenous Revolutionary People’s Liberation Party–Front (DHKP/C), and TAK are present in Turkey and conducted attacks in 2015 and 2016. The indigenous terrorist organization DHKP/C, established in the 1970s and designated by the U.S. in 1997, is responsible for several attacks against the U.S. Embassy in Ankara and the U.S. Consulate General Istanbul in recent years. The DHKP/C has stated its intention to commit further attacks against the United States, NATO, and Turkey. In addition, violent extremists associated with other groups have transited Turkey en route to Syria.

There have also been instances in past years of violence against religious missionaries and others perceived as proselytizing for a non-Islamic religion in Turkey. Perpetrators have threatened and assaulted Christian and Jewish individuals, groups, and places of worship, including several high-profile murders over the last decade. Anti-Israeli sentiment remains high.

11. Labor Policies and Practices

Turkey has a population of 82.8 million, with 23.6 percent under the age of 14 as of 2017. Over 92.5 percent of the population lives in urban areas . Official figures put the labor force at 31.6 million in 2017. Approximately one-fifth works in agriculture while another fifth works in industrial sectors. The country retains a significant informal sector. In 2017, the official unemployment rate stayed at 10.9 percent, with 20.8 percent unemployment among those 15-24 years old. Turkey provides twelve years of free, compulsory education to children of both sexes in state schools. Authorities continue to grapple with facilitating legal employment for working-age Syrians, a major subset of the over 3.4 million displaced Syrian men, women, and children—unknown numbers of which were working informally—in the country in 2017.

Turkey has an abundance of unskilled and semi-skilled labor, and vocational training schools exist at the high school level. There remains a shortage of high-tech workers. Individual high-tech firms, both local and foreign-owned, typically conduct their own training programs. The Ministry of Science, Industry and Technology has launched a program with TOBB to provide skilled laborers to meet manufacturing sector needs. Turkey has also undertaken a significant expansion of university programs, building dozens of new colleges and universities over the last decade.

The use of subcontracted workers for jobs not temporary in nature remained common, including by firms executing contracts for the state. Generally ineligible for equal benefits or collective bargaining rights, subcontracted workers—often hired via revolving contracts of less than a year duration— remained vulnerable to sudden termination by employers and, in some cases, poor working conditions. Employers typically utilized subcontracted workers to minimize salary/benefit expenditures and, according to critics, to prevent unionization of employees.

The law provides for the right of workers to form and join independent unions, bargain collectively, and conduct legal strikes. However, labor strikes have been forbidden since July 2016 under the continuing state of emergency. A minimum of seven workers is required to establish a trade union without prior approval. To become a bargaining agent, a union must represent 40 percent of the employees at a given work site and one percent of all workers in that particular industry. Certain public employees, such as senior officials, magistrates, members of the armed forces, and police, cannot form unions. Nonunionized workers, such as migrants, domestic servants, and those in the informal economy, are also not covered by collective bargaining laws.

Unionization rates generally remain low. Independent labor unions—distinct from their government-friendly counterpart unions—reported that employers continued to use threats, violence, and layoffs in unionized workplaces across sectors. Service-sector union organizers reported that private sector employers sometimes ignored the law and dismissed workers to discourage union activity. Turkish law provides for the right to strike but prohibits strikes by public workers engaged in safeguarding life and property and by workers in the coal mining and petroleum industries, hospitals and funeral industries, urban transportation, energy and sanitation services, national defense, banking, and education. The law explicitly allows the government to deny the right to strike for any situation it determines a threat to national security. Turkey has labor-dispute resolution mechanisms, including the Supreme Arbitration Board, which addresses disputes between employers and employees pursuant to collective bargaining agreements. Labor courts function effectively and relatively efficiently. Appeals, however, can last for years. If a court rules that an employer unfairly dismissed a worker and should either reinstate or compensate him or her, the employer generally pays compensation to the employee along with a fine.

Turkey has ratified key International Labor Organization (ILO) conventions protecting workers’ rights, including conventions on Freedom of Association and Protection of the Right to Organize; Rights to Organize and to Bargain Collectively; Abolition of Forced Labor; Minimum Age; Occupational Health and Safety; Termination of Employment; and Elimination of the Worst Forms of Child Labor. Implementation of a number of these, including ILO Convention 87 (Convention Concerning Freedom of Association and Protection of the Right to Organize) and Convention 98 (Convention Concerning the Application of the Principles of the Right to Organize and to Bargain Collectively), remained uneven. Implementation of legislation related to workplace health and safety likewise remained uneven. Child labor continued, including in its worst forms and particularly in the seasonal agricultural sector, despite ongoing government efforts to address the issue. See the Department of State’s annual Country Reports on Human Rights Practices and the Department of Labor’s annual Findings on the Worst Forms of Child Labor for more details on Turkey’s labor sector and the challenges it continues to face.

12. OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) offers a full range of programs in Turkey, including political risk insurance for U.S. investors, under its bilateral agreement. OPIC is also active in financing private investment projects implemented by U.S. investors in Turkey, including public hospital projects. Currently, OPIC is looking to support increased lending for renewable energy and energy efficiency projects in Turkey. Small- and medium-sized U.S. investors in Turkey are also eligible to utilize the Small Business Center facility at OPIC, offering OPIC finance and insurance support on an expedited basis for loans from USD 100,000 to USD 10 million. In 1987, Turkey became a member of the Multinational Investment Guarantee Agency (MIGA).

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USDM USD) 2017 USD 851,046 2016 USD 857,000 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (USDM USD, stock positions) 2016 USD 4,346 2016 USD 3,1001 BEA data available at
Host country’s FDI in the United States (USDM USD, stock positions) 2016 USD 631 2016 USD 652 BEA data available at
Total inbound stock of FDI as percent host GDP N/A N/A 2016 15.5% N/A

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data (2017 provisional) 
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 7,437 100% Total Outward 3,177 100%
Holland 1,768 24% USA 820 26%
Spain 1,451 20% Holland 734 23%
Azerbaijan 1,009 14% United Kingdom 338 11%
Austria 326 4% Azerbaijan 265 8%
Japan 295 4% Germany 212 7%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,283 100% All Countries 497 100% All Countries 787 100%
Cayman Islands 399 31% United States 258 52% Cayman Islands 399 51%
United States 301 23% Luxembourg 132 27% Lebanon 138 18%
Luxembourg 142 11% Germany 28 6 % United States 42 5%
Lebanon 138 11% United Kingdom 22 4% Germany 33 4%
Germany 61 5% China, P.R.: Hong Kong 17 3% Netherlands 32 4%

14. Contact for More Information

Economic Specialist
American Embassy Ankara
110 Ataturk Blvd.
Kavaklidere, 06100 Ankara – Turkey
Phone: +90 (312) 455-5555

2018 Investment Climate Statements: Turkey
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