Legal Economic Forum, Turkey is the130th country

Legal factors include discriminatory practices and laws, partisan
consumer law, anti-trust
law administered  on undertakings
breaching public trust, harsh employment
laws and health and safety law. These factors can
affect how a company operates, its costs, and the demand for its products.

DL: 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.

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2 out
of 5 women are exposed to physical and sexual violence at least one in their
lifetime.

 

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), Chemical,Energy,Automobiles. Privatization Programmes, New
investment incentive schemes are designed to encourage investments, reduce
dependency on the imports of intermediary goods vital to country’s strategic
sectors. 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 technology. To increase local and foreign investment,
support instruments such as Exemption and refund of VAT, Exemption,VAT Refund, Exemption
of custom Duty Tax, low levels of interest rate,  allowance withholding, reducing income tax,  etc are doled out.                                                                       
                                             

 

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 the three times of the actual damage. In addition, attorneys’ fees, cost
of litigation and/or mandatory expenditure made during the course of the investigations
made 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
markets.

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. Forms of terms of price and shipment- Turkish
import businesses often process transactions at FOB prices in consideration for
using Turkish shipping companies. Cost and freight and Cost Insurance and
freight terms are accepted only if the freight is proved to be cost-effective. Also
Turkish importers generally have “open insurance” for their import
cargos.

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
commissioned.

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.  For example, growth rate includes the ageing
population and may imply a smaller and less-willing workforce (thus increasing
the cost of labour). In such a scenario, companies may change various
management strategies to adapt to social trends caused from recruiting older
workers.

Population
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:

a)    
Political
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,347in 2016 Islam was the major religion in Turkey
comprising only 82% of the total population, followed by the unaffiliated
people who comprised 13% of the population, and Christianity with 2%.

b)   
Social fabric: With a change in
leadership Turkey is gradually shifted from Mustafa Pasha’s secular tradition
to a Islamic nationalism.

c)    
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
tendering processes.

 

 Series of legislative reforms to facilitate
foreign investment, creation of ISPAT,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
EU. 

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
duty. 

 

Challenges to doing business in Turkey: social and
legal

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.