Guidance

Overseas business risk: Turkey

Updated 9 March 2021

1. Political and economic

Political overview

Turkey is a secular democracy with a majority Muslim population. Its Head of State is President Recep Tayyip Erdoğan. Prior to election as president, Erdoğan served as Prime Minister. He is also leader of the Justice and Development Party (AKP), a centre-right party.

President Erdoğan is currently serving his second term as President. He was re-elected in June 2018 with 52.6% of the vote. The AKP party and its allies the Nationalist Movement Party and the Great Unity Party collectively hold 338 seats in Turkey’s 600-seat legislature. The next election is expected in 2023 – the centenary of the Turkish republic.

The main opposition Republic People’s Party (CHP) has 135 seats in the Turkish Grand National Assembly, the pro-Kurdish People’s Democratic Party (HDP) has 56 and the centre-right Good Party has 37. The communist Workers’ Party has two seats, the Democrat Party has two seats, new-party DEVA holds one seat, and the Conservative Felicity Party has one seat. There are 10 independents.

The 2017 referendum shifted Turkey from a parliamentary to an executive presidential system of government. The Turkish presidency holds the majority of decision making powers within Turkey. The government is also focused on economic and judicial reforms, among other priorities.

The Kurdistan Worker’s Party (PKK), a proscribed terrorist organisation, abandoned its two-year ceasefire in July 2015. The PKK continues to launch attacks in Turkey, particularly in the south east of the country.

The attempted coup on 15 July 2016 killed 241 and injured more than two thousand. The government subsequently declared a state of emergency. This expired in July 2018, following the introduction of the new presidential system. However many of the restrictions implemented in that time were implemented as permanent legislation. Critics accuse these new laws of restricting democratic rights and freedoms in Turkey.

Economic overview

Turkey is the world’s 19th largest economy with $750bn GDP. GDP per capita tripled between 2002 and 2016 to $10,512. Per capita income was recorded as $8,600 in 2019.

Following an economic crisis in 2001, Turkey undertook major structural change in the finance sector, which, coupled with subsequent economic and political stability, led to an average growth rate of 5% between 2002 and 2014. Turkey’s economy slowed following security concerns, a failed coup attempt, and fall in tourism receipts. Growth accelerated in 2017, to 7.4%. Then fell to 2.6% and 0.9% in 2018 and 2019 respectively.

Turkish economy was hit hard by the COVID-19 pandemic and contracted by nearly 10% in the second quarter of 2020. However, following a large credit expansion, the economy recovered in the second half of the year and grew 1.8% in 2020. The IMF forecasts Turkey’s economy to grow by 6% in 2021, before falling to 3.2% in 2022. The World Bank forecast 4.5% growth in 2021.

There was a sharp depreciation of the lira in 2018. The currency lost 25% of its value against the dollar in August, adding pressure to the economy. There has been some recovery before the second shock came when currency passed as $1=TL8.50. Following the replacement of Berat Albayrak with Lutfi Elvan as the Treasury and Finance Minister, lira has strengthened and remains below $1=TL7.50. As a result of large currency depreciation in 2018, inflation increased to over 25% in October 2018, as the added cost of a weaker lira is passed on to consumers.

Inflation has since fallen but remains in double-digits.

The bulk of Turkey’s economy is made up of a diversified services sector including real estate, tourism, financial services, education and health. Industry continues to play an important role, as does agriculture. Manufacturing accounts for a large proportion of Turkish exports to Europe in the form of household goods e.g. Beko and Vestel.

Tourism and wider services sectors have been hit hard by the pandemic and still struggles. Industrial sector has performed relatively better. The Turkish government aims to decrease Turkey’s import dependency in its growth and export structure, while increasing its capabilities to become an exporter of high technology products.

Turkey is an important energy transit country and aims to become a European energy transit hub. Turkey has the capacity to transport 121 million tons of oil to the world markets per year, typically from the Middle East and Caspian to EU markets. This is roughly 3% of annual global oil consumption. Turkey is also important for natural gas transit. The opening of the Trans-Anatolia Natural Gas Pipeline (TANAP) in June 2018 brings gas from Azerbaijan to European markets for the first time.

More information on political risk, including political demonstrations is available on FCDO Travel Advice.

Trade and economic relations

• Turkey has the youngest and fastest growing population in Europe (700,000 graduates per year)
• Istanbul’s economy alone is larger than the collective economies of 12 EU countries
• Turkey has the world’s second largest contracting sector, after China

Trade between the UK and Turkey has increased almost 70% in the last decade. Trade in 2019 was worth £18.6bn. There are a significant number of business links between the UK and Turkey. Over 2,500 UK companies are currently operating here including BP, Shell, Vodafone, Unilever (UK), BAE, Aviva and Diageo. Well-known retail chains, including M&S, and Kingfisher also have significant operations in Turkey.

2. Doing business

EU accession talks are the main driver for the modernisation of Turkey’s economy and business environment. As well as its large domestic consumer market of 82 million, Turkey is also a springboard to the markets of Central Asia and the Middle East.

In December 2020 the UK and Turkish Governments signed a free trade agreement to provide continuity for businesses previously trading under the terms of the EU-Turkey Customs Union. As a result, UK companies do not experience the same obstacles they face in other high growth markets. However regulatory hurdles, decision-making paralysis and sudden changes to legislation and regulations can be frustrating. Additional duties, applied to protect domestic industry, apply to UK companies if their products are manufactured outside the UK or EU.

Investors have expressed concern at frequent regulatory changes that occur with short implementation timeframes and insufficient evaluation of the wider consequences for the sectors concerned. Some have expressed concern over rule of law, including independence and impartiality of state institutions.

Feedback from some Turkish companies shows that British companies are perceived as risk-averse, over cautious and slow to make decisions. Although requisite due diligence is advised, UK business does need to demonstrate a commitment to the market, either by having a visible presence here or building and maintaining strong relationships.

This means regular visits to the market; and a willingness to commit to projects or business opportunities early on. This could include demonstrating a key product- or skill-set and capability to fulfill Turkish requirements with an indication that they are prepared to discuss and tailor the final solution to Turkish needs.

In doing so, British companies will need to be in a position to react to short tender timelines in Turkey and be well-placed to provide defined specifics later. Turkish companies are often interested in partnerships and knowledge transfer, rather than a purely transactional commercial relationship.

3. Turkey’s competitiveness and transparency

Turkey is ranked 33 out of 190 economies in the World Bank’s Doing Business 2019 Report and placed above many other emerging markets including India and local competitors Romania and Bulgaria. Turkey stands at 77 among 190 economies on the ease of starting a business.

Turkey ranks 61st out of 140 in the Global Competitiveness index 2018 compiled by the World Economic Forum. In 2018 Turkey was ranked in the Transparency International corruption indicators as 78 out of 180 countries. Turkey placed higher than China and Brazil, and at the same level as India. However, Turkey performed worse than South Africa and Bulgaria.

New Turkish commercial code

The New Turkish Commercial Code (which came into force on 1 July 2012) goes some way to addressing the need for greater transparency and reduced bureaucracy in Turkish business as well as flexibility in directorship. Turkish companies increasingly have strong corporate governance and social responsibility structures in place. Turkish companies are now subject to Corporate Governance Compliance legislation and in due course conformity to international financial reporting standards (IFRS), which should ensure increased international confidence in the market.

4. Human rights

The UK continues to encourage human rights reforms in Turkey to ensure that democratic and justice standards as set out in international law are met. Turkey is a signatory to the European Convention on Human Rights (ECHR) and is also committed to protecting fundamental freedoms in the framework of its EU accession process.

The UK supports bilateral projects in partnership with Turkish government institutions and civil society that aim to strengthen rule of law and rights protections. The European Commission’s most recent progress report for Turkey noted that Turkey and the EU had increased their cooperation in some areas but it described backsliding in areas of fundamental freedoms.

5. Bribery and corruption

Under the UK Bribery Act 2010, it is a UK criminal offence to offer, promise, give, agree, receive or accept bribes. The UK can prosecute British Nationals, UK residents, UK Corporate Bodies and Scottish Partnerships irrespective of whether the offending took place in the UK or elsewhere.

In addition, a commercial organisation carrying on a business in the UK can be prosecuted for failing to prevent bribery. This can be the conduct of any person linked to the organisation, whether a UK national, and would include for example employees, intermediaries and consultants.

Turkey has its own separate laws around bribery under Article 252 of the Turkish Criminal Code. The OECD has assessed Turkey to have made significant progress since 2007 in its efforts to combat bribery, but has recognised that it needs to urgently strengthen its enforcement framework and reform its corporate liability legislation.

According to Transparency International’s 2020 Corruption Perceptions Index, Turkey scored 40 out of 100 points and ranked 86 out of 180 with a 9 point increase in the public perception of corruption comparing to 2012.

Visit the gov.uk bribery guide providing advice and guidance about the Bribery Act and some basic effective procedures you can establish to protect your company.

Read the information provided on our bribery and corruption page.

6. Terrorism threat

Please read the information provided in the terrorism section of the Foreign Office travel advice for Turkey.

7. Protective security advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses.

The levels of crime in Turkey are moderate. The main issues currently are:

• burglaries
• demonstrations can occur regularly in major cities, which can disrupt public order
• fraud against the individual

8. Intellectual property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets.

IP rights have been protected under the general rules of Turkish law since the beginning of the Turkish Republic. Turkey is a party to a number of international agreements, conventions and treaties related to intellectual property rights. Under Turkish law, the main intellectual property rights that are capable of protection are patents, trademarks, registered and unregistered designs, copyrights and confidential information.

The Turkish Patent Institute registers trademarks, patents, license agreements and such rights upon application. The protection starts when the application is lodged with the Turkish Patent Institute.

Read the information provided on our Intellectual Property page.

9. Organised crime

Turkey is now viewed as a source, transit and destination country for Organised Immigration Crime. The majority of irregular migrants that are attempting to reach the EU are non-Turkish nationals transiting Turkey. Turkey works hard to house and supply approximately 4 million refugees (3.5 million Syrians and 0.5 million non-Syrians) in country.

The Turkish authorities, including the Turkish National Police, Jandarma and Turkish Coast Guard allocate resources and deploy specialist capabilities to tackle illegal immigration, especially against facilitators and organisers involved in these illicit activities.

The flow of irregular migrants has a direct impact on the UK. There are risks to the UK’s regional priorities concerning stability and rule of law. The high number of people crossing borders illegally increases the vulnerability of the countries through which they pass, and increases the risk of serious and organised crime, such as drug trafficking, people smuggling, modern slavery and human trafficking and money laundering.

Turkey continues to be a prominent transit country for heroin trafficking from source countries including Afghanistan, to end use European countries, and more recently in the movement of cocaine from South America.

Turkish authorities undertake significant operational activity to counter narcotics trafficking into and through Turkey. Turkish authorities continue to make significant seizures of all drug types and investigate international drug trafficking, evidenced in the first quarter of 2018 with a reported 523% increase in the total heroin seized and per annum forecast to be more than the rest of Europe put together.

Read the information provided on our organised crime page.

10. Contact

For more information regarding doing business with Turkey please contact the Department for Business and Trade’s (DBT) team in the country.