1. GENERAL DIRECTORATE OF INCENTIVE IMPLEMENTATION AND FOREIGN INVESTMENT
TURKEY’S GENERAL ECONOMIC OUTLOOK
GENERAL DIRECTORATE OF INCENTIVE IMPLEMENTATION AND FOREIGN INVESTMENT
Distinguished Guests, Ladies and Gentlemen;
What I would like to do today is give you brief information on the Turkish economy and investment climate in Turkey. But, before starting, let me introduce myself. My name is Hasan Aslan Akpınar. I have been working as the Head of Department of International Relations at the General Directorate of Incentives and Foreign Investment. At the Ministry of Economy, in our Department, I have specialized in the negotiation of bilateral investment treaties. (And along my career, I have attended negotiations with more than 40 countries, and one of those countries was the UAE. In 2001, we visited Abu Dhabi for two-day negotiations. After long, but constructive and friendly negotiations, we succeeded to finalize the negotiations in Consequently, Turkey-UAE bilateral investment treaty was signed in Because of this, I am very proud to take a part in the development of the legal foundation of Turkey-UAE investment relations. So, today, we will fell very happy if we can attract your attention to Turkey’s great potential for your investments. So, if you are all ready, let’s start with the first slide.)
March, 2013
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2. Market Size WORLD’S BIGGEST ECONOMIES
GDP based on purchasing-power-parity (PPP), 2011
First of all, looking at the world’s biggest economies, as you see, today, Turkey is the sixteenth biggest economy in the world with a GDP of 1 trillion billion USD on PPP terms.
Source: World Economic Outlook Database, October 2012

3. Growth Performance
* Source:TURKSTAT
Turkey has quickly recovered from the global financial crisis and among the least affected countries from current economic uncertainties
Turkey has the highest economic growth rate in Europe
Average annual growth rate between 2002 and 2011 is 6%
Real GDP growth for 2011 has been realized as 8.5%
In the first three quarters of 2012, Turkey grew by 2.6%
And apart from being one of the biggest economies of Europe and the Middle East, Turkey’s economy is growing fast while many developed economies still suffer from the global economic crisis.
For the last decade, the average annual growth rate has been 6%. For the previous year, the real GDP growth has been realized as 8,5%
Turkey felt the effects of the global economic crises temporarily in , and then quickly recovered and continued to develop with higher rates. (9.2 in 2010 and 8.5 in 2011) 3 3

4. Growth Performance
The GDP growth rate of 2011 was well beyond the forecast of IMF and Turkey became the second fastest growing country after China.
When we compare Turkey with other countries, Turkey ranks as the second country following China with 8.5 percent.
Source: TURKSTAT, IMF
Turkish Economy expanded by 8.5% in 2011, which was well beyond the forecast of the IMF (7.5%). 4 4

5. Market Potential: GDP Per Capita
While Turkish economy is growing, GDP percapita is also increasing very fast. In the last decade, GDP percapita of Turkey has tripled and it surpssed USD threshold in On the other hand, according to purchasing power parity terms, Turkey’s GDP percapita has almost reached to USD.
Source: TURKSTAT
GDP per capita has tripled in the last eight years from 3,492 USD to 10,444 USD. According to Purchasing Power Parity (PPP), GDP per capita surpassed 15,000 USD. 5

6. Turkey: One of the Eight Growth Markets of Future
Brazil
Russia
India
China
Mexico
Korea
Turkey
Indonesia
And let’s look at Turkey’s potential; according to a recent study made by Goldman Sachs, Turkey has been defined as one of the “Growth Markets” in the world. Growth markets can be seen as an extension to BRICs countries, including Mexico, Korea, Indonesia and Turkey. The most striking fact about the growth markets is their enormous growth projection; it is estimated that in 2050, these countries will constitute 46% of the global GDP.
Source: Goldman Sachs Asset Management, 2011 6

7. Market Quality: Favourable Demographics
The demographic profile of Turkey is very favorable, where 90% of the population is under 60 years old, and 26% of the population under 14 years old. In short, with its young population, having high demand for consumer goods, Turkey is an attractive market for all investors.
Source: World Bank
Turkey has a population of 74.7 million in which half of the population is under the age of 29.7.
Growth rate of population is 1.36% in Turkey, 0.28% in EU Countries and -0.24% in Germany.

8. Inflation (Annual Percent Change)
The inflation, which used to be a major macroeconomic problem of Turkey is now under control within a disciplined public finance management. The annual inflation rate is targeted to be stabilized between the 6-7% range for the coming years.
Source: TURKSTAT
Annual inflation in 2012 realized as 6.16%.
In January 2013, the inflation based on CPI and PPI increased by 7.31% and 1.88% respectively.

9. Budget Performance
The central government budget deficit is planned to be stabilized between 1 to 1,5 percent of the GDP for the following years. 9

10. Budget Performance
2011
EU defined general government budget deficit/GDP ratio was 2.6% in Turkey in and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 18 EU Countries.
Central government budget deficit/GDP ratio was 1.3% in Turkey in 2011 and Turkey outperformed 23 EU Countries.
In 2012, central government budget deficit was 28.8 billion dollars.
This performance of budget deficit is below the Maastricht criteria, and Turkey outperformed 18 EU countries. 10

11. Debt Management
The central government gross debt stock is on a steady decrease, and since 2004 Turkey is satisfying the Maastricht criteria. 11

12. Debt Management
Compared to many European countries struggling with debt problem, Turkish economy operates with a sustainable debt structure.
Central Government Debt to GDP ratio of Turkey was less than forty percent in 2011, which was well below all the EU countries.
Debt/GDP ratio of Turkey was 39.4% in 2011, which was below the level in 21 EU Countries and the Maastricht Criteria (60%). 12 12

13. Foreign Trade of Turkey
But in general, EU continues to be the major trading partner of Turkey.
Source: Ministry of Economy 13 13

14. FDI Figures Period FDI inflows (cumulative)
Companies with Intr.Capital (cumulative)
15 Billion USD
6.000
120 Billion USD
30.000
The rise of the Turkish economy is also endorsed by foreign investors. Annual direct investment inflows to Turkey has nearly twelve folded in the last decade and reached 12 billion USD on average. For the previous year, the FDI inflows has been realized as nearly 16 billion US Dollars. The number of companies with foreign capitals have also exceeded 30,000 this year...
Source: Ministry of Economy 14

15. FDI Outflows
Turkey is becoming a global player with increasing outward investments.
FDI outflow data shows that Turkey is becoming a global player with increasing outward investments. For the year 2011, Turkey’s FDI outflows reached USD 2.5 billion USD.
Source: CBRT, BOP Report 15 15

16. GENERAL DIRECTORATE OF INCENTIVE IMPLEMENTATION AND FOREIGN INVESTMENT
INVESTMENT CLIMATE IN
TURKEY
GENERAL DIRECTORATE OF INCENTIVE IMPLEMENTATION AND FOREIGN INVESTMENT
Having looked at the Macro-economic climate of Turkey, now I would like to give some information with regard to FDI regime and investment climate in Turkey. 16 16

17. No pre-entry screening /minimum capital requirements
FDI REGIME: BASIC PRINCIPLES
National treatment
No pre-entry screening /minimum capital requirements
Right to acquire real estate
Guarantee to free transfer of proceeds, dividends and other financial assets.
Right to employ key expatriate staff
Right to access international dispute settlement
Foreign Direct Investment Regime
Starting with the FDI Regime,
Turkey is applying NT to foreign investors,
There is no pre-entry or minimum capital requirements.
Foreign investors have right to acquire real estate.
Foreign investors can freely transfer their returns and profits without any restrictions.
They right to employ key personel; and most importantly.
They have right to access international dispute settlement.
And this regime is guaranteed and supported by International Agreements.

18. International Agreements – TURKEY & USA
FDI REGIME: International Agreements
International Agreements – TURKEY & USA
Bilateral Investment Treaty
Signature date : December 03, 1985
Entry into force : May 18, 1990
Double Taxation Treaty
Signature date : March 03, 1996
Entry into force : December 19, 1997
In this context, there is a BIT and DTA between Turkey and UAE. 18

19. Company establishment in one day-online application
COMPANY REGISTRATION
Company establishment in one day-online application
Starting and operating a business on equal terms with local investors within the context of the new Turkish Commercial Code
All types of companies are allowed
Significant cost and time advantages comparing with the countries in the region
Company Registration
In Turkey, starting a bussiness is very easy:
You can establsih your company in six days,
And start and operate your bussiness on equsl terms with local investors.

20. Notarized signatures of founders
COMPANY REGISTRATION: PROCEDURES
Company Statute and
Notarized signatures of founders
Deposit the initial capital in a bank
and the %00,4 of the capital
to the account of the Competition Authority
Register with the Trade Registry and
the Chamber of Commerce and/or Industry
Company registration is completed in four steps..
Notarize Commercial Books

21. REAL ESTATE ACQUISITIONS BY FOREIGNERS: BASIC PRINCIPLES
Real Estate Acquisition of Foreigners
Foreign Real Persons
Foreign Companies
Turkish Companies with foreign capital
can acquire real estate in Turkey according to different rules
In Turkey, acquisition of real estate id possible for foreigners; in this context, there are 3 different regimes in terms of real estate acquisitions.
Source: Emerging Trends in Real Estate Europe 2012 survey.
Note: On scale of 1 to 5.

22. REAL ESTATE ACQUISITIONS BY FOREIGNERS: BASIC PRINCIPLES
Foreign Real Persons
Acquisition is possible for all nationalities
without requiring “reciprocity”
Acquisitions up to 30 hectares
The total area of real estates can not exceed 10% of the privately owned land in the town.
Requirement to develop a project within two years in case the acquisition of a vacant land
Foreign Companies
Real estate acquisition of foreigners is governed by the Articles 35 and 36 of the Land Registry Law, Law No: A recent legal amendment introducing significant changes on the mentioned Articles was approved by the Turkish Parliament on May 3, 2012 and published in the Official Gazette dated May 18, 2012.
This legal amendment abolished the reciprocity requirement in real estate acquisitions of real persons.
Land Registry Law, Article 35.
The total surface area of the land that can be acquired by a foreigner up to 30 hectares. The Council of Ministers is also authorized to increase thirty hectares up to twice. The new Law, similar to the former legislation, regulated that the total area of the real estates acquired by foreign real persons cannot exceed ten per cent of the privately owned land in the town. In case that foreign real and legal persons acquire a vacant land (land without any building on it), they are required to develop a project within two years following the acquisition and submit it to the relevant Ministry for approval.
Acquisition of real estate within the context of special laws such as Petroleum Law, Tourism Encouragement Law, Industrial Zones Law.

23. REAL ESTATE ACQUISITIONS BY FOREIGNERS: BASIC PRINCIPLES
Turkish Companies with Foreign Capital
No restriction on acquisition and utilization of real
estates to conduct business activities listed in
the Statute of Company.
Permission requirement is necessary only for foreign capital companies controlled by foreign investors. (own more than 50 %)
Permission requirement for the acquisitions in
military zones and special security zones
from the military authorities
and province governorship respectively
Within this context, the companies controlled by foreign investors (the companies in which foreign shareholders own at least fifty per cent of the shares or have the authority to assign or dismiss the majority of the managers) willing to acquire immovable and/or limited rights in-rem in Turkey shall apply to the Provincial Planning and Coordination Directorate (Prefecture Office) at the location of the immovable by presenting the required documents. The foreign capital companies out of this scope, on the other hand,  shall acquire and use real estates in equal conditions with the local companies. 
However, acquisitions in military zones and special security zones require permission from the Turkish military authorities and province governorships respectively.
Article 36 also grants exemptions to specific cases where flexibility is required for the effectiveness of implementation and where special regulations have been provided. Thus, Article 36 will not apply to the pledge on real estates, liquidation of such pledges, acquisitions of real estates within the context of mergers and divisions of the companies, acquisitions in the specific investment areas such as organized industrial zones, technology development zones or free zones and acquisitions of banks for the collection of their receivables (However, the banking regulation stipulates the liquidation of such properties within a specific period of time). 

24. FDI INFLOWS FROM USA Source: CBRT, OECD
FDI outflow data shows that Turkey is becoming a global player with increasing outward investments. For the year 2011, Turkey’s FDI outflows reached USD 2.5 billion USD.
Source: CBRT, OECD 24 24

25. USA’S FOREIGN DIRECT INVESTMENTS IN TURKEY25

26. Start-up permission for 10 years Permitted fields of activity:
NEW TREND :
TURKEY AS A REGIONAL HEADQUARTERS FOR MULTINATIONALS
Regional Management Headquarters
Start-up permission for 10 years
Permitted fields of activity:
Representation and hosting,
Control, inspection and provision of local suppliers,
Technical support,
Communication and transfer of information.
Income Tax Exemption for Executives
Apart from companies and branches It is also possible to establish regional management headquarters in Turkey under the structure of liaison offices.
Turkey has become a prominent global and regional hub for many international companies in the management, production, and distribution fields, mainly due to the geographical and logistic advantages it offers.
We give permission to set up regional management headquarters as liaison offices provided that they do not engage in commercial activities. These offices may operate in activities like Representation and hosting, Control, inspection and provision of local suppliers, Technical support and Communication and transfer of information.
In Turkey, we provide great convenience to attract more regional headquarters in Turkey.
That’s why we grant longer operation permits to Headquarters compared to regular liaison officies.
These offices also do not pay income tax for their executives.
It is much more easier to obtain working permit if you are working for a Regional Headquarter. The insolvency process is also a way easier compared to regular companies. 26

27. NEW TREND :
TURKEY AS A REGIONAL HEADQUARTERS FOR MULTINATIONALS
Coca-Cola Eurasia and Africa manages more than 70,000 employees in 90 different countries from the company’s regional headquarters in İstanbul*.
The International Finance Corporation (IFC),the World Bank Group organization uses its Istanbul office to cover 52 countries in Europe, the Middle East and North Africa (EMENA) regions**. 
Alstom Transport, the transportation branch of French multinational conglomerate, has appointed its Turkish office to run its businesses in the Middle Eastern and African markets***. 
A large number of multinational corporations ranging from Coca-Cola to Unilever, from Adobe to Microsoft, manage their operations in Europe, Eurasia, Middle East, Turkic Republics and the Mediterranean from their HQs in Turkey, particularly Istanbul.
* Source: Today’s Zaman, Jan 19,2011
** Source: Haberturk, May 30,2011
*** Source: Dünya, Dec.18, 2012 27

28. Improving Investment Climate Activities
Improving Investment Environment in Turkey
Improving Investment Climate Activities
Regulatory reform is a continual process and the agenda is a moving target
Making full use of public-private dialogue through permanent platforms:
The Coordination Council for Improvement of Investment Climate (YOIKK)
The Investment Advisory Council for Turkey (IAC)
Now that we have an seen how to do business in Turkey in general let's turn our attention to the efforts carried to improve investment environment in Turkey.
In Turkey policy makers are aware of that regulatory reform is a continual process and the agenda is a moving target. Keeping that fact in mind 2 permanent public-private dialogue platforms were established to create a welcoming business environment and to increase global competitiveness of the country.
The first one is the national one which is: The Coordination Council for Improvement of Investment Climate what we call YOIKK for short.
And the other one is Investment Advisory Counsil that I will explain on the last slide.
In simple terms;
These platforms are mostly outcome of an ongoing joint effort of public and private sector.

29. Consultation Communication Engagement
Improving Investment Environment in Turkey
YOIKK
Aim : to enable private sector growth by reducing overly burdensome regulations and by enhancing inefficient institutions that discourage the creation and expansion of businesses
Basically YOIKK is a platform where public institutions and NGO’s work hand in hand to enable private sector growth by reducing overly burdensome regulations and by enhancing inefficient institutions that discourage the creation and expansion of businesses.
The success of investment reform policies widely relies on getting the private sector understanding and feedback on the operation of policies/regulations/procedures that effect their economic activity.
The efforts to improve investment climate in Turkey is grounded in close and constructive consultation, communication and engagement between businesses and government authorities.
What makes YOIKK a successful example of PPD is that it enables private sector to VOICE in determination of legislations/regulations which in turn promote transparency in decisions and actions.
Consultation Communication Engagement
PUBLIC SECTOR
PRIVATE SECTOR

30. Investment Advisory Council of Turkey had 7 meetings since 2004.
Structures for Improving Investment Environment in Turkey
Investment Advisory Council
Executives of leading multinational firms,
Heads of international institutions
(IMF, World Bank, European Investment Bank) and
Heads of NGO’s (TOBB, TUSIAD, YASED, TIM).
Finally lets move on to the Investment Advisory Council. Here is the family photo of the latest meeting that was held on May ,
Actually, IAC was established in 2004 in order to improve Turkey’s image as an attractive investment destination and provide an international perspective for the ongoing investment climate reform agenda.
IAC Meetings are held regularly every year and CEO’s of world’s leading companies gather in Istanbul to discuss the recent progresses in business climate in Turkey and develop new recommendations for a better investment environment.
Therefore, the Council is a mean to obtain the feedbacks of international investors on investment environment efforts in Turkey and it also provides inputs for the YOIKK studies.
To sum up; Turkey gives high importance to the recommendations of both domestic and international investors and considers them while structuring its reform programs and action plans for the investment policies.
Investment Advisory Council of Turkey had 7 meetings since 2004. 30 30

31. Contact Info: Ministry of Economy
General Directorate for Incentive Implementation and Foreign Investment
Ministry Phone:
Fax:
&
Web:
That brings me to the end of my presentation.
(As I end here, I hope we are a little closer to the investment climate in Turkey.)
I would like to thank to all of you for listening me so patiently.
For further inquiries: 31 31