VIEWS: 29 PAGES: 8 CATEGORY: Investments POSTED ON: 7/15/2010
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.
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
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