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, increase the level of supportive instruments, boost Investment
support for lesser developed regions and promote clustering activities and
investment that will create better 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 a breach of consumer trust . This has
resulted in a rise in the awareness of competition law within the country.
The Authority determines infringements during its investigations. A maximum fine
of 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.
Contract Forms: Turkish importers tend to use standardized
form of contracts in their transactions. Foreign contracts are seldom accepted
for fear that they may be contain hidden or unfamiliar contract stipulations. Special
provisions may be added to the contract form. Addition of special provisions to the contract form is
Terms of payment- Payment is usually done by letter
of credit. Inspection Certificates
regarding weight,quality or quantity of goods– issued by manufacturers or
public assessors – are required as part of the process of setting up a letter
of credit. 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 which states that the solution must be sought
through friendly consultation. Arbitration is sometimes adopted to settle the
dispute. 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(Common external tariff, elimination
of all customs duties i.e a drop from 10% customs duty to 0) for industrial
products and processed agricultural products.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. In 2007, Turkey reached a record high 22 bn USD in FDI, which fell 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 the Middle East. According
to the 2016 Global Peace Index, Turkey ranks 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.Islam is 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
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 FDI: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.
The government can
legally jail citizens that question them
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. Under Tayyip Erdo?an
and the AKP, Turkey 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 are
highly controversial topics in the country.Turkey’s human rights record
continues to be a significant obstacle to their achievement of a future
membership to 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 has
identified 81 jailed journalists in Turkey.
In reaction to the failed coup d’état on 15
July 2016, over 125,000 judges, police ,teachers and civil servants have been
suspended or dismissed. 36,000 have been offically arrested and 130 media
organisations, including 16 television broadcasters and 45 newspapers have been shut down by the government of
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 the country; 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 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 are 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:Trade in Narcotics is the biggest organised crime threat in Turkey.
Turkey remains a key transit country for heroin from Afghanistan destined for
Western Europe. With the growth of the Turkish economy and its geographical
accessibility, Turkey may also find itself becoming more attractive as a
destination country for Organised Immigration Crime.