How to do business with Turkey?

Interview with Mehmet Yazici, partner at Synergy Group,  for the Bulgarian magazine “Your Business”

Turkey, with a population of 76 million (1) has the youngest population compared with the EU (2). The geo-strategic position of Turkey with a location in the middle of Europe, the Middle East, Central Asia and the Black Sea, Turkey is naturally well-placed to be one of the vital trade centers in the world.

The Turkish economy has shown remarkable performance with its steady growth over the last eight years. A sound macroeconomic strategy in combination with prudent fiscal policies and major structural reforms in effect since 2002 has integrated the Turkish economy into the globalized world, while transforming the country into one of the major recipients of foreign direct investors in its region.

The structural reforms, supported by Turkey’s EU accession process, have paved the way for comprehensive changes in a number of areas. The main objectives of these efforts were to increase the role of the private sector in the Turkish economy, to enhance the efficiency and resiliency of the financial sector, and to place the social security system on a more solid foundation. As these reforms have strengthened the macroeconomic fundamentals of the country, the economy grew with an average annual real GDP growth rate of 5 percent over the past decade between 2002 and 2012 (3).

Customs Union with the EU since 1996, Free Trade Agreements (FTA) with 22 countries as well as the significant performance in last decade, Turkey has attracted new investors all around the world. Many foreign investors either operate directly in the country or entered the market via mergers and acquisitions.

Now, Turkey is the commercial hub of the region and foreign investors should consider using Turkish partners to access business opportunities throughout Turkic Countries, Central Asia, the Middle East and even North Africa. Turkey is the 17th largest economy in the world. Yet, on the Fortune list of dollar billionaires, the country hit number six recently.

 The Republic of Turkey’s goal of full-membership in the European Union is creating a driving force to adopt European regulations and standards in Turkey. Significantly in last decade with the positive effect of strong government Turkey have created a strong and stable economy that attracts foreign investors.

The 2001 economic crisis in Turkey stimulated enter of foreign banks in Turkish market. The momentum of this entrance triggered the appetite of doing business in Turkey and turned the market into an arena for global players. During this time, traditional methods in trade replaced with the global standards. Therefore, it is highly possible to feel by the investor both traditional and modern business methods in their relations in Turkey. But we should take note that about that 99% of SMEs are family-owned enterprises which still has significant traditional, religious and cultural effects on their business relations.

By the effect of high competition conditions and business tradition, if you want to do business in Turkey you need to know that your success is defined by your ability to build an effective personal relationship combined with a clearly outlined and well-presented business proposal. In the first stage of the market entrance, we suggest the investors to have a professional help from a consultant company or to work with an experienced local partner.

Decision making and business process can be slow. Investors may meet and negotiate several times with senior managers and family members in the process. Besides, likely the other developing countries, such as contradictory policies, tight regulations and documentation requirements, lack of transparency in tenders, unpredictable judiciary and legal and regulatory framework can affect your plans. Careful planning and patience are the keys to success in Turkey.

Preregistration, registration and post-registration process is about 2 weeks. Because of the complexity of the process trade register, notary and other legal procedures need to be follow-up by an accountant. Deposited in a bank 25% of the capital before registration is also required. The New Turkish Commercial Code (TCC) allows the establishment of joint stock companies (JSC) or limited liability companies (LLC) with only a single shareholder. Minimum capital requirement for LLCs is 10.000 TL and for JSCs 50.000 TL.

Corporate income, as adjusted for exemptions and deductions and including prior year losses is subject to corporate income tax at a rate of 20%. The Turkish tax system levies value added tax on the supply and the importation of goods and services.

Electricity prices in Turkey is lower than European Union average and above than Bulgarian rates but gas prices lower than both (www.eurostat.com).

Young and well-educated workforce is another asset for Turkey. However there is a significant differentiation between developed west and less developed east part of Turkey.

Minimum Wages in Turkey (4)

Gross salary

978,60 TL

Social insurance employee

137,00 TL

Unemployment insurance contribution employee

9,79 TL

Income tax

51,37 TL

Cost of living allowance (Single and no children)

73,40 TL

Stamp tax

6,46 TL

Total deductions

204,62 TL

Net Salary

773,98 TL

Total cost for employer

1.140,07 TL

 HOW TO ATRACT INVESTMENTS FROM TURKEY?

Turkey is among the top five trading partners of Bulgaria. The bilateral trade volume between Turkey and Bulgaria reached almost 3 billion USD and there are 1200 active Turkish companies in Bulgaria.

According the Turkish Foreign Ministry records, main items that Turkey export to Bulgaria are iron and steel, motor vehicles, electric and non-electric machinery and equipment, plastics and plastic goods. The main products of great importance in Turkey’s imports from Bulgaria are respectively, iron and steel, copper and copper goods, mineral fuels and mineral oils (5).
Despite the geographic proximity of Turkey’s most developed region, Bulgarian products have so far largely failed to reach the huge market of 20 million people. Key industries are motor vehicles and automotive parts, construction, textile, chemicals, tourism, agriculture, healthcare and steel-iron in Turkey.

There are a lot of business opportunities both Turkey and Bulgaria in these sectors. But one of the most important sectors in the future will be energy. Electricity demand and investments has been growing significantly in recent years. Turkey expects continued economic growth, which will require additional generating capacity to meet growing demand. Bulgarian suppliers and service companies can benefit from opportunities in electricity and gas distribution, power generation and renewable energies, particularly water, wind and solar.

Bulgaria has relatively important advantages in mining, transportation and agriculture sectors. Opportunities also exist in telecommunications services and equipment, automotive parts, medical equipment, R &D, infrastructure, construction and higher education services.

There are two most attractive things for Turkish investors in Bulgaria one is location and the other is low production costs. Bulgaria is located in the key entry point to the EU, the Balkans and Eastern Europe for Turkey. Bulgarian companies have to stress on that key advantage while talking Turkish companies.

The other more general things that helps to attract the Turkish investors are tax advantages and incentives, infrastructure and transportation conditions, institutionalism, politic and economic stability.

Because of relatively large size and competitive structure of the Turkish market, Bulgarian companies should have a competitive advantage, good financial standing, future plans and foreign trade experience or at least have a good consultant before starting a business with Turkish companies.

 Sources

(1) www.turkstat.gov.tr

(2) www.eurostat.com

(3) www.invest.gov.tr

(4) www.csgb.gov.tr

(5) www.mfa.gov.tr

Important Sources For Further Information

Investment Support and Promotion Agency – www.invest.gov.tr

Ministry of Economy – www.ekonomi.gov.tr

Central Bank of Turkey – www.tcmb.gov.tr

Undersecretariat of Treasury – www.treasury.gov.tr

Ministry of Finance – www.maliye.gov.tr

Turkish Revenue Administration – www.gib.gov.tr

Ministry of Foreign Affairs – www.mfa.gov.tr

Ministry of Science, Industry and Development – www.sanayi.gov.tr

Ministry of Customs and Trade – www.gumruk.gov.tr

Ministry of Labor and Social Security – www.calisma.gov.tr

Capital Market Board (CMB) – www.spk.gov.tr

Ministry of Development – www.dpt.gov.tr

Privatization Administration – www.oib.gov.tr

State Institute of Statistics – www.tuik.gov.tr

İstanbul Stock Exchange (ISE) – www.imkb.gov.tr

Union of Banks – www.tbb.org.tr

Union of Chambers and Markets – www.tobb.org.tr

İstanbul Chamber of Commerce – www.ito.org.tr

İstanbul Chamber of Industry – www.iso.org.tr

Association of Foreign Investors – www.yased.org.tr

Foreign Economic Relations Board – www.deik.org.tr

Turkish Exporters Council – www.tim.org.tr

Prime Ministry Investment Support and Promotion Agency (ISPAT) – www.invest.gov.tr

Turkish Industry and Business Association – www.tusiad.org

Muslim Businessmen Association – www.musiad.org.tr

Synergy Group Consulting – www.synergygroup-bg.com

Comments

  1. Mohd Hafizudin says:

    Hi,

    We are planning to open a restaurant in Istanbul. We have contacted and reads the requirements provided by the authority, The Republic of Turkey Prime Ministry Investment Support and Promotion Agency (ISPAT).

    We would think of appointing an agent to help us with the documentations and setting ups i.e.: Turkey company registration, nominee shareholders, Turkey banking, visas, legal and tax etc

    In addition, our team will fly to Istanbul sometime next week for feasibility study. Would you guys recommending any consultant or agent that can help us with the set ups?

    Regards,
    Hafiz

Speak Your Mind

*