1. Turkish Market Overview
Driven by private consumption and supported by a stable macroeconomic policy framework, the Turkish economy has grown significantly since the country emerged from the 2001 financial crisis. Between 2002 and 2008, Turkey’s GDP experienced an annual average growth of 5.8%, versus 1.8% in the EU. Due to global turmoil in 2009 Turkey’s GDP declined to US$614 bn, but rebounded in 2010, reaching US$729 bn and making Turkey the 16th largest economy in the world. Restructuring of the banking sector, monetary discipline based on independence of the Central Bank and a floating exchange rate regime, tight fiscal policy, public administration reform, and the EU accession process with reform packages enacted by the Parliament all contributed to the transformation of the country after the 2001 crisis. Foreign Direct Investment (FDI) inflows to Turkey declined in 2009 from a high of US$22 bn in 2007. FDI remained low in 2010 at US$8.9 bn, although this was sufficient for Turkey to be ranked 15th globally. Since the 2001 crisis the economy has been buoyant. It remains two notches below investment-grade credit rating but inflation is in single figures and the economic outlook is promising. Public debt is below 50%. Turkey is knocking on the door of the BRICs club of emerging giants and today it is perceived as ‘Europe’s BRIC’ or ‘the China of Europe’. Some economists suggest that over the next decade, Turkey’s growth will match or exceed that of any country except China and India. Others predict it could become the world’s 10th biggest economy by 2050.
2. Key Attractions of Turkey
- Turkey is located at a close proximity to Europe (two three hours’ flight to major European destinations), the Middle East and the Caucasus. Turkey benefits from its location as a bridge between Europe and Asia. It is also acts as an energy corridor connecting these two continents.
- Turkey entered a customs union with the EU in 1996 and has been an EU accession candidate since 2005. This has resulted in the expansion of trade relations with Europe, which now accounts for 44% of Turkey’s foreign trade.
- Turkey offers an accessible, skilled and cost-effective workforce, providing the fourth largest labour force amongst EU members and accession countries. It boasts a large population of over 74 m people, with an average of 29, over a decade lower than the EU figure.
- The Turkish government provides various tax and non-tax incentives to foreign investors, in line with those provided to domestic companies. These include customs and VAT exemptions on various imported or locally delivered goods, including machinery and equipment, as well as priority regions offering incentives such as free land and energy support. Investors are also able to benefit from R&D support and market research with the aim of encouraging exports and increasing the competitiveness of firms in international markets.
- The Turkish government has also introduced flexible exchange rate policies and liberal import regulations in order to promote and sustain foreign investment.
- In recent years, Turkish banks have taken an increasingly large role in financing project finance deals, benefiting in many cases from increasingly liquid balance sheets.
- The Turkish legal framework offers a level playing field to foreign investors and domestic companies. Foreign ownership is unrestricted, with no pre-entry screening requirements.
- A new commercial code nr. 6102 is currently published in the Official Gazette on 14 February 2011. The Code aims to integrate the local applications with EU law, improve transparency, protect minority rights and strengthen corporate governance principles. The new Turkish Commercial Code comes in
3. Doing Business – Negotiations Culture
- If you are going to Turkey to do business, know two things. Your success is defined by your ability to build effective personal relationships combined with a clearly outlined and well presented proposal.
- Business is personal in Turkey. Although this is changing with the more corporate culture in some of the larger companies, many businesses are still family owned and run.
- Turks will look at doing business with those they like, trust, feel comfortable with and with those that can provide a long term relationship. As well as looking to the person, Turks are also astute business people. Ensure your proposal clearly demonstrates the mutual benefit and profitability of any agreement or partnership.
- Turks are primarily oral and visual communicators so in addition to written statistics, projections and the like try to present information vocally or with maps, graphs and charts.
- If your doing business in Turkey involves negotiating, it may not always be necessary to focus on financial benefits. It is just as useful to point to areas such as power, influence, honour, respect and other non-monetary incentives.
- Decision making can be slow. It is most likely that you will meet and negotiate with less senior members of a family or company first. Once you are seen as trustworthy and your proposal financially viable you will then move on to meet more senior members. A decision is ultimately made by the head of the family/company.
- Prior to doing business or entering negotiations in Turkey know your target figure and work slowly towards it through meaningful concessions. When conceding ensure you present this as a favour and a decision made out of respect and liking for your counterpart(s). Try and concede only once you have gained agreement on a reciprocal concession on a separate or related issue.
- Do not use deadlines or pressure tactics as the Turks will use this to their advantage and reverse the tactic by threatening to cancel agreements or end negotiations. Be patient.
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