Turkey-A Study On Understanding The Business Environment

By:By:Abhimanyu Kr. Singh Saurav Anand

FacultyFacultyProf. Pinaki Dasgupta

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Turkey Evolution

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

About Turkey

Total Population: 73,885,055

Annual growth rate: 1.2%

Density: 96 inhabitant/km²

Urban population: 68.2%

Population of main cities including suburbs: Istanbul (12,500,000); Ankara

(3,925,000); Izmir (2,825,000); Bursa (1,580,000); Adana (1,400,000).

Ethnic Origins: There are more than 70 ethnic groups in Turkey. 75% Turks,

20% Kurds, 3-4% Circassians, and also Armenians, Greeks, Georgians,

Arabs, Europeans of Thethnic origins and the Balkans, Russians...(1-2%)

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Ottoman

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

About Turkey

Official Language: Turkish.

Other languages spoken: There are several other Altaic languages as well

as minorities speaking Kurdish, Greek, Armenian, Bulgarian, Albanian or

Circassian. English, French or German are languages used fairly frequently

in trade.

Business language: English is very commonly used in business.

Religion: Muslims 96%. Others: Jews, Orthodox, Catholics and Protestants.

Literacy rate: 87.4%

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

About Turkey

Type of State: Turkey is a republic based on a parliamentary

democracy.

Turkey is a "quasi-democratic" State in full transition. The army

plays an important role, however informal, in the political life of the

country.

Type of economy: Upper-middle-income economy, OECD member,

Emerging Financial Market.

HDI: 0,798/1

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Economic Indicators

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Economic Indicators

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Main sectors of industry

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Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Foreign trade in figures

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Main partner countries

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Main products

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Main products

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FDI in figures

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Investing In

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Investing in Turkey

Foreign investors’ substantial and growing exposure

in Turkey- As of November 2007, non-resident bond

holdings amounted to YTL 35.7 billion

“Reform Program for the Improvement of the

Investment Climate of Turkey” is underway

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Investing in Turkey

The Government recently reduced the corporate

income tax from 30 to 20 percent and implemented

tax reforms to improve collection efficiency and

reduce firms’ compliance costs

Exiting the market takes longer and yields lower

recovery rates than in comparator countries.

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Investing in Turkey

Turkish labor regulations are inflexible. Payroll taxes and

compulsory non-wage costs are high, and the employment

protection legislation is restrictive. Development Plan-Training and skill

Government’s

development

Training results encouraging but lack of analytical skills in

workers due to lack of enrolment in mathematics and natural

sciences

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Investing in Turkey

Past Bank Group Assistance

Turkey is the largest borrower in the Europe and

Central Asia Region

Third largest World Bank borrower in terms of new

commitments of over US$1.5 billion during the last three

years.

The original, FY04-06 CAS envisaged a low-case

scenario with a lending volume of up to US$1.3 billion

and a high-case scenario with a lending program of

US$4.5 billion Gandhi Institute Of Petroleum Technology MBA 2008-10 Rajiv

Investing in Turkey

A strong International Finance Corporation (IFC) program

contributed to the achievement of the CAS objectives

Multilateral Investment Guarantee Agency (MIGA) has

also been active in Turkey. It has provided guarantees both

for investments in Turkey and to Turkish investors investing

abroad

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Government measures to motivate or restrict FDI

Since 2003, investors are no longer obliged to acquire a minimum

interest.

Nevertheless, the government encourages investments in the form

of Build Operate Transfer (BOT)

It favors investments in the High Tech, textiles, services (health,

education, transport), telecommunications, shipbuilding,

electronics and biotechnologies sectors

Export-oriented projects are also promoted.

Decree n° 24 810 of 9 July 2002 defines public aid for investment

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Bilateral Investment Conventions Signed by Turkey

Turkey has signed bilateral conventions with nearly 80

countries

In the Mediterranean basin, Turkey has signed bilateral

conventions with Algeria, Egypt, Israel, Spain, Greece,

Lebanon, Morocco, Portugal and Tunisia

conventions -They define the framework of protection for

foreign investment in Turkey for each of the signatory

countries

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Strategy for Business-India & Turkey

Current Status

Major trade area

Strength

Weakness

Opportunities

Recommendations

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Current Status

Diplomatic relations between India and Turkey was

established in 1948

India has an embassy in Ankara and a consulate–

general in Istanbul

Due to Turkey’s key strategic support for India's

chronological enemy, Pakistan, relations between the

two countries have sometimes been coldly strained

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Current Status

Turkey-India trade has increased by over 300 per cent in

the last five years and there is potential for significant

upsurge with Free Trade Agreement (FTA) between the two

countries at advanced stage of negotiations Up from $800

million to $2.6 billion

Already Indian infrastructure company GMR has

successfully taken up development of a major airport in

Turkey

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Current Status

• For 2008-2009 India exported US$ 1.38 billion worth of

goods to Turkey, India imported US$ 1.44 billion

• Indian exports to Turkey-cotton, yarn, machinery,

drugs, transport equipment and chemicals

• India mainly imports machinery, iron and steel, ores

and metal scrap, and inorganic and organic chemicals

from Turkey

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Major Trade Area

Cotton

Iron &Steel

Plastics

Orgainc Fiber

Chemicals

Trade Basket

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Strong points

A geographical strategic location

A well developed industrial basin

A country whose calling is to join the EU club by 2015-2020

A rapidly developing consumer middle class

A sustained growth influenced by a modern and dynamic private sector

A strong increase in productivity in recent years

A legal framework close to European standards and favorable to

investment-CU,OECD

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Weak points

The slowing down of economic and political reforms observed since

the end of 2005

A strong dependence on hydrocarbon imports and on exports

An uncertainty regarding the exchange rate

A disturbing deficit of the balance of current payments Insufficient

and sometimes obsolete, infrastructures

Earthquake prone region

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Opportunities

Automobile & Auto components-M&M (Farm Equipments) , TATA

Infrastructure-GMR

ITES

Power-Suzlon

Refinery & Petrochmeicals-Indian Oil

Steel-Mittal

Leather

Jewelery

http://www.mahindratractorworld.com/turkey.html

http://www.tata.com.tr/default.asp

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Recommendations

• Three major gas pipelines with Caspean Sea oil to

Mediterranean, Turkey-Greece links and another link

to that serves Bulgaria, Romania and a few other

counties. Map

• Promotion to big infrastructure project in

transportation sector (BOT)

• Development of ports-Through Joint Ventures

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Recommendations

• Mutual cooperation in areas
– Carpet – Dyes – Organic chemicals – Auto components

– Energy – Construction, – Iron and steel, – IT – mining – gems and jewellery among others

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Thank You!

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

References

www.fita.org www.foreigntrade.com www.eiu.com www.wto.org

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

Rajiv Gandhi Institute Of Petroleum Technology MBA 2008-10

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