Docstoc

Foreign Investment in Turkey

Document Sample
Foreign Investment in Turkey Powered By Docstoc
					Foreign Investment
    in Turkey
                                                              FOREIGN DIRECT
                                                              INVESTMENT IN TURKEY




                  FOREIGN DIRECT INVESTMENTS
                          IN TURKEY
         Legal Framework for FDI in Turkey                   ment environment for foreign investors, such as:
           Pro-business foreign investment policies have         • Turkey is a member of OECD, WTO, IMF,
      been introduced as part of the liberalization of       World Bank and organizations of the World
      the Turkish economy. The foreign investment leg-       Bank, including Multinational International
      islation provides a more secure environment for        Guaranty Agency (“MIGA”).
      foreign capital by providing support from several          • Agreements to protect and promote invest-
      bilateral and multilateral agreements and organi-      ment have been signed with 77 countries, and 62
      zations, granting foreign capital the same rights      of these such agreements are currently in force.
      and obligations as local capital, and guaranteeing         • Agreements to avoid double taxation are
      the transfer of profits, fees and royalties and the    currently in effect with 61 countries.
      repatriation of capital.                                   • Turkey has been a party to OECD Codes
                                                             of Capital Movements and Invisible Transactions
           The foreign direct investment Law No. 4875,
                                                             and the convention on the International Center
      which has been in force since June 17, 2003,
                                                             for Settlement of Disputes.
      emphasizes the key elements of the liberal invest-
                                                                 • Turkey has been a party to investment-
      ment environment in Turkey, and represents a
                                                             related agreements on WTO platforms such as
      “legal guide” to international investors about their
                                                             TRIMs (Trade Related Investment Measures) and
      rights and obligations. Since all companies estab-
                                                             TRIPs (Trade Related Intellectual Property
      lished in Turkey within the framework of the
                                                             Rights).
      Turkish Commercial Code are considered
                                                                 In 1999, the Grand National Assembly passed
      Turkish companies, all duties and responsibilities
                                                             a Constitutional amendment permitting national
      are the same, regardless of the nature of the cap-     and international arbitration of certain business
      ital structure of the company.                         disputes involving concession agreements for pub-
           Law No. 4875 provides:                            lic services. In 2000, the related implementation
           • freedom to invest by eliminating all former     laws allowing international arbitration in con-
      FDI-related screening, approval, share transfer        tracts involving Turkey and foreign investors
      and minimum capital requirements;                      were approved by the Parliament.
           • reassurance of existing guarantees in one           In addition, regulated markets for electricity
      transparent and stable document;                       and natural gas were introduced to address the
           • upgrading to accepted international stan-       shortcomings of the current centralized model.
      dards for definitions of “foreign investor” and        The telecommunications sector has also under-
      “foreign direct investment”; and                       gone changes, transforming the formerly monop-
           • a policy shift from ex-ante control to a pro-   olistic structure to a regulated and competitive
      motion and facilitation approach with minimal ex-      sector. The High Council of Telecommunications
      post monitoring.                                       was established in 2000 as a supervisory body for
           Turkey has been a party to several interna-       the telecommunication industry. The last step
      tional organizations and bilateral and multilateral    towards a full liberalization of the sector began
160   agreements, which provide a more secure invest-        on January 1, 2004 following the termination of
      FROIGN DIRECT INVESTMENTS IN TURKEY                                                         TURKEY



the monopoly of Turk Telekom on voice teleph-
ony services and telecommunication infrastruc-
ture. Following full liberalization, the
Telecommunication Authority granted the first
licenses for territorial data transmission.

   FDI Statistics
    According to the balance of payment statistics
published by the Central Bank of the Republic of
Turkey, the capital (inflow) of US $ 1.752 million in
2003 has increased by 55,9 % in 2004 and reached
to US $ 2.837 million. In 2000, 2001 and 2002
total direct foreign capital (inflow) are US $ 982
million, US $ 3.352 million and US $ 1.137 million
respectively.
    In line with the recovery of the main economic
indicators and efforts to improve investment envi-
ronment, FDI inflows continued to rise in 2005.
Net FDI inflows into Turkey totaled $ 9.667 million
in 2005, implying more than three fold increase
compared to 2004.
    As of 2005, there are 11.685 companies with
foreign capital in Turkey. Out of these, 9.684 are
of new company and branch establishment and
2.001 are of foreign capital participations into exist-   ment up to today; the leading investors are
ing companies.                                            Germany, USA, the Netherlands, Greece, United
    Investments in the services sector accounted for      Kingdom, Switzerland, Belgium and Russian
91 % of total foreign direct investment for 2005,         Federation.
while manufacturing accounted for 8,5 % of such
total.                                                        Within the manufacturing industries, the lead-
    In the year of 2005, 209 incentive certificates       ing sectors are;
were issued for investments to be carried out by              • Automotive and transportation equipment
companies with foreign capital, and the estimated             • Food, beverage and tobacco industries
total value of these investments within these certifi-        • Chemical and petroleum products
cates amount to US$ 3,49 million, of which 51%                • Electrical machinery and electronics
will be undertaken by foreign shareholders.                   Within services sector, the leading sectors
    In terms of accumulated foreign capital commit-       are;
                                                              • Banking
                                                              • Trade & retail chain stores
                                                              • Telecommunications
                                                              • Tourism

                                                             Policy Reforms to Increase the
                                                             FDI Inflows to Turkey
                                                             Strengthening private sector activity in the
                                                          Turkish economy is an integral part of the           161
                                                               FOREIGN DIRECT
                                                               INVESTMENT IN TURKEY


      Government’s overall macroeconomic stabilization        ensure that policy reforms truly reflect and address
      program. The aim of the program is to achieve a         private sector concerns, intensive and direct
      sustainable growth level with a vibrant private sec-    involvement of companies and investors in this
      tor and a smaller but more effective public sector.     process is critical. Each technical committee there-
      Key structural reforms in major markets such as         fore consists of private sector and government
      agriculture, pensions, banking, telecommunications      agencies’ representatives. The Board’s mandate is
      and energy and accelerated privatisation program        to make specific recommendations to the Council
      have been adopted, which will pave the way for a        of Ministers who will take the required political
      more dynamic private sector.                            decisions to remove the obstacles impeding the
                                                              improvement of the investment climate.
          Despite its competitive advantages and diverse
      market opportunities, FDI inflows have not lived up
      to the potential of an economy of that size.
      Recognizing the importance of this issue, the
      Government placed efforts for improving the
      investment environment at the top of the political
      agenda.
          The Government of Turkey has therefore initi-
      ated a comprehensive reform program in
      December 2001, to streamline all investment-relat-
      ed procedures and to attract more private direct
      domestic and foreign investment. The Government              The key reform areas have been determined
      has established a Co-ordination Board for               after a comprehensive study conducted by the
      Improving the Investment Environment (YOIKK).           Undersecretariat of Treasury of the Prime Ministry
      The Board assigned specialized technical commit-        in cooperation with Foreign Investment Advisory
      tees to work on developing concrete proposals and       Services, a joint service of the International Finance
      strategies in order to overcome all main obstacles.     Corporation and The World Bank. Technical
      Productive collaboration between the public and         Committees are responsible for the following top-
      the private sector is the key in this process. To       ics:
                        Technical Committee I                   : Company Establishment
                        Technical Committee II                  : Employment
                        Technical Committee III                 : Sectoral Licenses
                        Technical Committee IV                  : Location of Investment
                        Technical Committee V                   : Taxes and Incentives
                        Technical Committee VI                  : Foreign Trade and Customs
                        Technical Committee VII                 : Intellectual Property Rights
                        Technical Committee VIII                : Promotion of Investment
                        Technical Committee IX                  : Foreign Direct Investment Regulation
                        Technical Committee X                   : Small and Medium Sized Enterprises

         To increase efficiency of the YOIKK, a new           ness associations which have seats on the YOIKK
      Steering Committee was established in May 2005,         and Turkey Investment Advisory Council platforms.
      involving high level executives of six Ministries and      The Steering Committee is made up of ;
162   governmental agencies and the four leading busi-           • The Undersecretary of the Treasury,
      FROIGN DIRECT INVESTMENTS IN TURKEY                                                        TURKEY



    • Deputy Undersecretary of the Prime Ministry     aids system in line with EU requirements, and other
(Responsible for the Department of Administrative     laws regarding insurance, encouragement of
Development),                                         tourism, the prevention of smuggling and inflation
    • Deputy Undersecretary of the State Planning     adjusted accounting.
Organization,                                             Furthermore, the YOIKK Program efforts have
    • Deputy Undersecretary of the Ministry of        produced results in other areas such as recruitment
Finance,                                              of expatriates, sectoral licencing, customs and intel-
                                                      lectual and industrial property rights. With respect
    • Deputy Undersecretary of the Ministry of
                                                      to customs reform, the Undersecretariat of
Industry and Commerce,
                                                      Customs has implemented a reform program to
    • Deputy Undersecretary of Foreign Trade,         improve its administrative efficiency and effective-
    • Secretary General of TOBB,                      ness. The automated customs system has been
    • Secretary General of TÜS‹AD,                    established at 99% of all customs offices and has
                                                      been further enhanced to assist customs in control-
    • Secretary General of T‹M,
                                                      ling the movement of goods. One of the goals of
    • Secretary General of YASED.                     the customs reforms is to conform the customs reg-
    The Undersecretary of the Treasury chairs the     ulations and procedures to those mandated by EU
Steering Committee. In case of necessity, the         legislation and simplifying and harmonizing the
Chairman is able to invite representatives from       forms, procedures and control techniques to con-
institutions who dose not take place among mem-       form with those recommended by the World
bers. The secretariat services of the Steering        Custom Organization. Necessary legislation to
Committee is being carried out by the General         strengthen the capacity and infrastructure of the
Directorate of Foreign Investment.                    Turkish Patent Institute has been enacted, which
    The duties and responsibilities of the YOIKK      seeks to ensure effective implementation of the reg-
Steering Committee are listed below:                  ulation and protection of intellectual and industrial
    • To determine the agendas of the YOIKK           property rights.
meetings,                                                 Reduction in the corporate tax rate from 30%
    • To follow up and coordinate the works of the    to 20% in 2006 has been implemented and
YOIKK and Technical Committees,                       Turkey’s competitiveness in terms of corporate tax
                                                      rates has been strengthened. New regulations on
    • To establish Permanent Work Groups on           “Opening a Business Place and Work License” have
issues lying outside the scope of the Technical       reduced the required number of documents from
Committees,                                           52 to 6 for licensing of sanitary business place and
    • To evaluate the reports prepared by             from 43 to 7 for licensing of non-sanitary business
Technical Committees and/or Permanent Work            place. The number of documents required to
Groups and submit these to the YOIKK via the          obtain an Opening License has been reduced from
Secretariat.                                          18 to only 2.
    Laws enacted as a result of the YOIKK Program         While strengthening the existing capacity on
to date include the Law on Employment of Foreign      investment promotion, works on the legislation to
Personnel, Foreign Direct Investment Law, amend-      establish an institutional capacity for investment
ments to the Turkish Commercial Code that             promotion have been finalized. Law No. 5523 on
redesign the company registration process (reduc-     Establishment of         Investment Support and
ing the steps required from 19 to 3 and reducing      Promotion Agency of Turkey went into effect on
the turnaround time from two and a half months to     July 4, 2006. Under the office of the Prime Minister,
one day), Mining Law, Labour Law, Turkish Patent      the Agency will have administrative and financial
Institute Law, the law on the investment allowance    autonomy to sustain operational flexibility and pro-
system, which enables a shift to an automatic state   vide information and guidance for investors              163
                                                               FOREIGN DIRECT
                                                               INVESTMENT IN TURKEY


      throughout every step of the investment process.        the private sector. At the end of the inaugural
      The law on establishment of development agencies        meeting the Council members decided to convene
      regulating the formation of the Investment Support      once a year and highlighted a number of priority
      Offices which will assist investors in obtaining nec-   issues which they believed to be hindering the full
      essary permissions and provide coordination in          blossoming of Turkey’s potential and which they
      legal procedures, has entered into force in February    view it would be beneficial to concentrate upon
      2006.                                                   until the next meeting. The YOIKK technical com-
          In April 2005, Law No. 5331 became effective,       mittees serve as the affiliated “working groups” of
      granting the Council of Ministers the power to          the IAC. The creation of the linkage between the
      define and govern Small and Medium Enterprises          two structures leverages and strengthens their
      (SMEs). The primary purpose of the Law is to abol-      respective institutional capacities. The IAC pro-
      ish regulations prone to conflicting interpretation     vides critical strategic direction and impetus to the
      and bring the rules governing SMEs in line with EU      YOIKK, while the YOIKK in turn provides imple-
      legislation.                                            mentation follow up to the IAC recommendations.
          One of the key issues in the reform agenda of           Some issues identified in the IAC meetings are
                                                              being remitted to the YOIKK for further research,
      the Government of Turkey is attributing great
                                                              follow up and/or action. In line with the priorities
      importance to the role of collaboration between
                                                              set by the IAC, a discernible progress has been
      public and private sector. Therefore necessary plat-
                                                              made in improving the investment environment.
      forms have been created where the representa-
      tives of public and private sectors come together to        The Second and Third Meetings of the
      discuss and provide solutions on key issues facing      Investment Advisory Council was held on April 29,
      Turkey’s business climate. While Turkey has been        2005 and June 29, 2006 in Istanbul, respectively. At
      achieving quite positive results in improving the       the last two meetings, the IAC members unani-
      environment for business by means of national plat-     mously agreed that progress has been made in all
      forms like the YOIKK, an other structure has also       fronts, and highlighted the most important accom-
      been established with an international perspective,     plishments in the declaration of outcomes.
      named Investment Advisory Council (IAC) for
      Turkey in 2004 with a view to raise the competi-           General Incentive Regime
      tive position of Turkey in the world economy as an
                                                                   The principal purpose of incentives is to elimi-
      investment location. The Council, chaired by the
                                                              nate inter-regional imbalances, facilitate a larger cap-
      Prime Minister, is composed of top level executives     ital contribution by the public and support activities
      from twenty multinational corporations and presi-       that have a positive effect on employment.
      dents of four leading Turkish NGOs representing                               Furthermore, inflow of foreign
                                                                                    currency and advanced tech-
                                                                                    nology and improvement of
                                                                                    international competitiveness
                                                                                    are also aimed without breach-
                                                                                    ing international obligations.
                                                                                        Incentives for investments
                                                                                    to be realized in the priority
                                                                                    and least developed regions
                                                                                    simply aim to increase
                                                                                    employment in these regions
                                                                                    through tax exemptions and
                                                                                    other financial incentives.
164
      FROIGN DIRECT INVESTMENTS IN TURKEY                                                           TURKEY



   Major Incentive Instruments                         Amasya, Ardahan, Artvin, Batman, Bart›n, Bayburt,
     • Exemption from customs duties and fund          Bingöl, Bitlis, Çanakkale (only the provinces of
levies: This incentive measure ensures that the        Bozcaada and Gökçeada) Çank›r›, Çorum,
imported machinery and equipment for investment        Diyarbak›r, Elaz› , Erzincan, Erzurum, Giresun,
purposes are exempted from customs duties and          Gümüflhane, Hakkari, I d›r, Kahramanmarafl,
fund levies. Such machinery and equipment must be      Karabük, Karaman, Kars, Kastamonu, K›r›kkale,
included in the imported machinery and equipment       K›rflehir, Kilis, Malatya, Mardin, Mufl, Nevflehir,
list to be approved by General Directorate of          Ni de, Ordu, Osmaniye, Rize, Samsun, fianl›urfa,
Foreign Investment (GDFI). Raw materials and           Siirt, Sinop, fi›rnak, Sivas, Tokat, Trabzon, Tunceli,
intermediate goods cannot be imported under this       Van, Yozgat and Zonguldak.
provision.                                                • Normal regions- the remaining provinces.
   • Value Added Tax (VAT) exemption: The
VAT, payable for both imported and locally pur-
chased machinery and equipment, is exempted               Eligibility criteria for the incentives
under this incentive measure. Such machinery and          • The minimum amount of fixed investment
equipment must be included in the import machin-       must be YTL 400.000 for developed regions and
ery list and approved by GDFI. The locally pur-        normal regions, YTL 200.000 for priority regions.
chased machinery and equipment should be includ-
ed in the locally procured machinery list and
                                                          Incentives for the Least Developed Regions
approved by the GDFI.
                                                          According to the Law for the Encouragement of
   • Credit Allocation from the Budget: Credits
                                                       Investments and Employment, No. 5084, dated
can be allocated from the budget to the following
investments: Research and Development (R&D)            February 6, 2004, and Law on Amendments of the
investments,       Technopark       Establishment,     Law No.5084, No. 5350, dated May 12, 2005
Investments in Technoparks, Investments for            additional incentives are granted to the investors
Environmental Protection, Priority Technological       that invest in the following provinces, which have
Investments which are determined by the Supreme        per capita income equal to or less than $ 1,500 or
Council of Science and Technology or Scientific and    the provinces with a minus index value on the socio-
Technological Research Council of Turkey               economic development ranking: K›rflehir, Sinop,
(TUBITAK).In addition to the above investments to      Giresun, Amasya, Uflak, Malatya, Sivas, Tokat,
be moved to provinces specified for regional devel-    Diyarbak›r, Afyon, Bart›n, Erzincan, Osmaniye,
opment and investments to be moved to priority         Düzce, Çank›r›, Siirt, Gümüflhane, Ordu, Erzurum,
regions and other organized zones from developed       Batman, Bayburt, fianl›urfa, Mardin, Aksaray,
regions and manufacturing, agro-industry and min-      Ad›yaman, Kars, Van, I d›r, Yozgat, Ardahan,
ing investments to be realized in the priority         Hakkari, Bingöl, Bitlis, fi›rnak, Mufl, A r›, Artvin,
regions in compliance with the legislation on State    Çorum, Elaz› , Karaman, Kastamonu, Rize, Tunceli,
Subsidies for Investments.                             K.Marafl, Kilis, Kütahya, Nevflehir, Ni de, Trabzon.
    Turkey has three types of regions with regard          Additional incentives granted in the aforemen-
to implementation of incentive regime
                                                       tioned provinces are as follows:
    • Developed regions- the Provincial boundaries
                                                          • Incentive on witholding of income tax,
of Istanbul and Kocaeli, and the municipality bound-
aries of Ankara, Izmir, Bursa, Adana and Antalya.         • Insurance premium incentive for employers,
   • Priority regions- 50 provinces determined by         • Energy support,
the Council of Ministers; Ad›yaman, A r›, Aksaray,        • Free land allocation.                              165
                                                       FOREIGN DIRECT
                                                       INVESTMENT IN TURKEY




      Provinces where Free Land Lots are Provided in Organized Industrial   Provinces where Free
         Zones along with Tax, Insurance Premium and Energy Support             Land Lots are
                                                                                  Provided
                                                                            in Oranized Industrial
       1   ADIYAMAN          18    ERZ‹NCAN               35    N‹⁄DE
                                                                                   Zones
       2   AFYON             19    ERZURUM                36    ORDU
       3   A⁄RI              20    G‹RESUN                37    OSMAN‹YE     1     KARABÜK
       4   AKSARAY           21    GÜMÜfiHANE              38    R‹ZE         2     KIRIKKALE
       5   AMASYA            22    HAKKAR‹                39    fiANLIURFA    3     SAMSUN
       6   ARDAHAN           23    I⁄DIR                  40    S‹‹RT        4     ZONGULDAK
       7   ARTV‹N            24    KAHRAMANMARAfi 41             S‹NOP
       8   BARTIN            25    KARAMAN                42    fiIRNAK
       9   BATMAN            26    KARS                   43    S‹VAS
      10   BAYBURT           27    KASTAMONU              44    TOKAT
      11   B‹NGÖL            28    K‹L‹S                  45    TRABZON
      12   B‹TL‹S            29    KIRfiEH‹R               46    TUNCEL‹
      13   ÇANKIRI           30    KÜTAHYA                47    UfiAK
      14   ÇORUM             31    MALATYA                48    VAN
      15   D‹YARBAKIR        32    MART‹N                 49    YOZGAT
      16   DÜZCE             33    MUfi
166   17   ELAZI⁄            34    NEVfiEH‹R

				
DOCUMENT INFO
Shared By:
Stats:
views:29
posted:7/15/2010
language:English
pages:8
Description: Foreign investment is the investment income investors to get carried out exchange between the behavior of different currencies. Exchange is an "international exchange" is abbreviated, with dynamic and static two meanings. Dynamic meaning refers to a currency conversion into another currency, in order to settle international claims and liabilities of a specialized business activities. Static meaning that can be used in international settlement and foreign currency assets expressed in foreign currencies. Commonly referred to as "foreign exchange" is the term for the purposes of its static meaning.