Legal factors include Discriminatory practices and laws, Cconsumer laws, Anti-trustlaws, harsh Employmentlaws and Health and Safety laws. These factors canaffect how a company operates, its costs, and the demand for its products.Discrimination Laws:Even though the constitutional system of Turkey is based on the equality of allindividuals without discrimination before the law, irrespective of “language,race, color, gender, political opinion, philosophical belief, religion andsect, or any such consideration”, there is a slow shift to islamistnationalism. According to the Gender Gap Index (2015) of WorldEconomic Forum, Turkey is the130th country out of 145 countries, which means, Turkey whichis the 17th biggest economy in the world ranks among the lowestcountries (last 15th) in terms of gender equality.2 outof 5 women are exposed to physical and sexual violence at least once in theirlifetime. NEW TURKISH COMMERCIALCODE: BOT Model (Build,Operate,transfer) is adopted to gain a lead inindustrial promotion and investment financing.
Key sectors are industry andservices (Tourism) and other promising industries are Chemical,Energy,Automobiles,PrivatizationProgrammes,etc. New investment incentive schemes are designed to encourageinvestments and reduce dependency on the imports of intermediary goods vital tocountry’s strategic growth. The Primary Objective is to reduce the CurrentAccount Deficit, boost Investment support for lesser developed regions, increasethe level of supportive instruments and promote clustering activities andinvestment that will create transfer of information and technology. To increaselocal and foreign investment, support instruments such as Exemption and refundof VAT, Exemption of Customs Duty, low levels of interest rate, allowance withholding, reducing income tax, etchave been provided to the businesses. Breach of trust laws : Exorbitant fines are imposed by the Turkish CompetitionAuthority towards undertakings causing breach of trust .
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This has resulted in awarenessof competition law around the country. The Authority determinesinfringements during its investigations. A maximum fine upto 10% of the company’sprevious year’s turnover can be levied.
Additionally the aggrieved party mayfile a case for damages and the judicial authorities may impose compensationsup to three times the actual damage. In addition, attorneys’ fees, cost of litigationand/or mandatory expenditures made during the course of the investigations bythe Turkish Competition Authority may compound the litigation fees.. Employment laws: 10.8%of the labour force is unemployed. Womenconstitute 30% and men account for 70% ofthe labour force. A whopping 34% worked 50 hours or more- this being the highestin any OECD nation.
Intellectual Property (IP): IP rights areterritorial in nature. This means that if you are thinking about tradinginternationally, then you should consider registering your IP rights in your exportmarkets. Contract Forms: Turkish importers are prone to usetypically standardized form of contracts in their transactions. Foreigncontracts are seldom accepted for fear that they may be trapped by hidden or unfamiliarcontract stipulations.
Special provisions may be added to the contract form. Additionof special provisions to the contractform is normally acceptable. Terms of payment- Payment is usually done by letterof credit. Inspection Certificatesregarding weight,quality or quantity of goods– issued by manufacturers orpublic assessors – are required as part of the process of setting up a letterof credit. In the case of heavy equipment imports, Turks often insert a clausein the contract withholding a portion of the payment – generally 5 to 10% ofthe total contract amount – which will be paid only when the equipment isinstalled and commissioned. Resolution of Disputes: In cases of a dispute, a formalcontract must have a provision which states that the solution must be soughtthrough friendly consultation. Arbitration is sometimes adopted to settle thedispute.
Litigation is used only as a last resort. Social factors affecting business includevarious cultural aspects and the health consciousness of the country,population growth rate, age distribution, career attitudes,etcPopulationof Turkey is 76.9 million.It is mandatory for every fit male Turkish citizen, otherwise not barred, to serve inthe military for a period ranging from three weeks to a year, dependent oneducation and job location .It is the 2nd largest military force just behindthe US . Culture: Culture of Turkey sees clear efforts of combining modernizationand westernization into the social fabric while simultaneously trying to retain its traditional, religious andhistorical values. This results in a chaotic cultural identity and a constantbridging of unequal ethics and sensibilities.
Foreign Relations: Turkeyis not part of EU yet but has formed a customs union(Common external tariff, eliminationof all customs duties i.e a drop from 10% customs duty to 0) for industrialproducts and processed agricultural products.It is EU’s 4th largestexport market and 5th largest provider of imports. Turkey is also EU’s#1 export (44%) import (38%) partner. Turkey is the 2nd largestrecipient of FDI in West Asia behind Israel. In 2007, Turkey reached a record high 22 bn USD in FDI, which fell to17.
5 bn in 2015 and 12.1 bn in 2016 according to the Turkish Ministry ofEconomy.Turkey has signed bilateral agreements with 81 countries. Factors Hindering FDI:a) Politicalinstability Attempted coup in 2016,weak Currency, Inflation and Proximity toconflicts in the Middle East. Accordingto the 2016 Global Peace Index, Turkey ranks 145th out of 163 countries in theworld, mainly because of its conflict with Kurdish insurgents, its invasion ofCyprus and the military intervention in Syria. Minority groups other than thethree religious minorities recognized in the Treaty of Lausanne (Armenians,Greeks and Jews) do not have any official rights.Islam is the majorreligion in Turkey comprising 82% of the total population, followed by theunaffiliated people who comprised 13% of the population and Christianity with2%.
b) Social fabric: With a change inleadership Turkey has gradually shifted from Mustafa Kemal Pasha’s seculartradition to an Islamic nationalism.c) Turkey often fails to notify WTO aboutnon tariff barriers(Implementation of Reference Price Systems, New documentrequirements, lengthy inspections). Agro trade is subject to tariff quotas andprice regulations.
The Turkish Procurement system is prone to opaque and lengthytendering processes. Measures undertaken byTurkey to increase local and foreign investment:Series of legislative reformsto facilitate foreign investment, creation of ISPAT(Investment Support andPromotion Agency),FDI inflows improved in light of the development of pub-pvtpartnership for major infrastructure projects, structural reforms in bankingand finance sectors, robust growth rates, measures to streamline adminprocedures and strengthen intellectual property protection, end of FDIscreening and structural reforms carried out as EU ascension project. Govt. can jail citizensthat question the govt. or openly support the Kurds which has led to a highlevel of self- censorship.
Turkey ranks 154th out of 179 countriesin the World Press Freedom Index. Turkey under Tayyip Erdo?an and the AKP hasbeen described as becoming increasingly authoritarian.Human Rights- Freedomto life, life free from torture, Kurdish rights, women’s rights, LGBT rights,and press freedom, have also attracted controversy. Turkey’s human rightsrecord continues to be a significant obstacle to future membership in theEU. AKP govt isaccused of the world’s biggest crackdown on media freedom. Large number ofjournalists have been arrested using charges of “terrorism” and”anti-state activities, on charges of “denigrating Turkishness”or “insulting Islam” in an effort to sow self-censorship.
As of 2017, the CPJ hasidentified 81 jailed journalists in Turkey. In reaction to the failed coup d’état on 15July 2016, over 125,000 judges, police ,teachers and civil servants have beensuspended or dismissed. 36,000 have been offically arrested and 130 mediaorganisations, including 16 television broadcasters and 45 newspapers have been shut down by the government ofTurkey. Turkey’s judicial system has been wholly integrated with thesystem as that of continental Europe. In the years of government by the AKP andTayyip Erdo?an, particularly since 2013, the independence and integrity of theTurkish judiciary has been questioned by institutions, parliamentarians andjournalists both within and outside the country; due to political interferencein the promotion of judges and prosecutors, and in their pursuit of publicduty. Challenges to doing business in Turkey: social andlegalBribery and Corruption: Anyone doing business in Turkey is likely toencounter or hear of corruption in one form or another, although the level ofcorruption varies according to sector, type of business and region. However,the general perception is that the situation is improving. The OECD (Organisation for EconomicCo-operation & Development) has assessed Turkey to have made significantprogress since 2007 in its efforts to combat bribery in international businessdeals by fully implementing all but one of the recommendations of the OECD’sWorking Group on Bribery.
However, the Turkish media has reported that asignificant number of Turks believe bribery and fraud to be common in Turkey. Terrorism: There is a threat from terrorism withinTurkey and a number of terrorist groups remain active in the country. The mainterrorist group operating in Turkey is the separatist Kurdistan Workers Party(PKK). Street robbery, burgularies and pick-pocketing are common.
Organised Crime:Trade in Narcotics is the biggest organised crime threat in Turkey.Turkey remains a key transit country for heroin from Afghanistan destined forWestern Europe. With the growth of the Turkish economy and its geographicalaccessibility, Turkey may also find itself becoming more attractive as adestination country for Organised Immigration Crime.