Contents

INTRODUCTION ......................................................................................................................... 3
General Information .................................................................................................................... 3
POLITICAL RISKS AFFECTING BUSINESSES .................................................................... 3
PESTLE Analysis of Turkey ........................................................................................................ 4
THE POLITICAL ENVIRONMENT ......................................................................................... 4
Open market ................................................................................................................................ 4
Government Size ......................................................................................................................... 4
Regulatory Efficiency.................................................................................................................. 5
Rule of Law ................................................................................................................................. 5
Political Stability in Turkey......................................................................................................... 5
Ease of doing Business Index ...................................................................................................... 6
POLITICAL CHALLENGES ...................................................................................................... 6
Terrorist Attacks: ......................................................................................................................... 6
Bribery and Corruption: .............................................................................................................. 7
Political Risk ............................................................................................................................... 7
Turkey: Short-term political risk (1=low, 7=high) ...................................................................... 7
I Comparison of Political Risk between Turkey and Pakistan.................................................. 8
ECONOMIC RISKS ..................................................................................................................... 8
GDP ............................................................................................................................................. 8
Growth Rate ................................................................................................................................ 9
Investment in Turkey................................................................................................................... 9
High flow of Foreign Investment ................................................................................................ 9
Failed Coup Attempt, July 2016.................................................................................................. 9
Turkey- 2nd largest recipient of FDI ......................................................................................... 10
Turkey’s association with European Union............................................................................... 12
Government Promotes Investment ............................................................................................ 12
Turkey-Commercial Hub........................................................................................................... 12
Comparatively low labor costs .................................................................................................. 12
Low taxes & incentives ............................................................................................................. 12
Prudent fiscal and monetary policies ......................................................................................... 12
Current Account Deficit ............................................................................................................ 13
Exposure to conflicts in Syria.................................................................................................... 13
Political Uncertainty .................................................................................................................. 14

1
 Inflation rises ............................................................................................................................. 14
A Labor Market Unfit for Purpose ............................................................................................ 14
COMPARISON OF TURKEY AND PAKISTAN IN ECONOMIC INDICATORS ............ 15
SOCIAL SYSTEM ...................................................................................................................... 16
Population.................................................................................................................................. 16
Labor Force ............................................................................................................................... 16
Turkey: Labor force, million people ......................................................................................... 17
Unemployment Rate .................................................................................................................. 17
TECHNOLOGICAL ................................................................................................................... 17
LEGAL SYSTEM........................................................................................................................ 18
Company Law in Turkey ........................................................................................................... 18
Tax Law..................................................................................................................................... 18
Judicial System .......................................................................................................................... 19
Rules and Regulations for Business in Turkey.......................................................................... 19
Rules for foreigners working in Turkey .................................................................................... 20
ENVIRONMENTAL................................................................................................................... 21
CULTURAL ISSUES TO BE CONSIDERED ......................................................................... 21
CONCLUSION ............................................................................................................................ 22

2
 INTRODUCTION

Turkey is a transcontinental country located in Southeastern Europe and Southwestern

Asia bordering the Black Sea. Neighboring countries include Armenia, Azerbaijan,
Bulgaria, Georgia, Greece, Iran, Iraq, and Syria. Turkey has a strategic location
controlling the Turkish Straits that link the Black and Aegean Seas. The geography of
Turkey consists of narrow coastal plains in the west that become increasingly rugged as
they progress eastward. The government system is a republican parliamentary
democracy; the chief of state is the president, and the head of government is the prime
minister. Turkey has a mixed economy in which there is a growing private sector
combined with centralized economic planning and government regulation.

General Information
Official Name Republic of Turkey
Capital Ankara
President Recep Tayyip Erdoğan
Currency Lira
Population 80,810,525[
Language Turkish
Declaration of Republic 29 October 1923
Land area 783,356 km2

POLITICAL RISKS AFFECTING BUSINESSES

There are many external environmental factors that can affect your business. It is common
for managers to assess each of these factors closely. The aim is always to take better
decisions for the firm’s progress. Some common factors are political, economic, social and
technological (known as PEST analysis). Companies also study environmental, legal,
ethical and demographical factors.
The political factors affecting business are often given a lot of importance. Several aspects
of government policy can affect business. All firms must follow the law. Managers must
find how upcoming legislations can affect their activities. You should understand that the
political factors have the power to change results. It can also affect government policies at
local to federal level. Companies should be ready to deal with the local and international
outcomes of politics. Increase or decrease in tax could also be an example of a political

3
element. Your government might increase taxes for some companies and lower it for
others. The decision will have a direct effect on your businesses. So, you must always stay
up-to-date with such political factors. Government interventions like shifts in interest rate
can have an effect on the demand patterns of company.
Certain factors create Inter-linkages in many ways. Some examples are:
o Political decisions affect the economic environment.
o Political decisions influence the country’s socio-cultural environment.
o Politicians can influence the rate of emergence of new technologies.
o Politicians can influence acceptance of new technologies.

PESTLE Analysis of Turkey

It gives investors an insight into political, economic, social, technological and legislative
situation in Turkey which is necessary to invest successfully in the market. With the help
of PESTEL analysis, six areas have been analyzed and evaluated.

THE POLITICAL ENVIRONMENT

One of the current political strengths in Turkey is that their government have policies on
liberalization. Turkey is supporters of liberal trade and investment policies which allow
open trade between different countries in the EU. Turkey forged a custom union agreement
in 1996 to allow many Turkish firms to get bigger and more successful in the global
economy. Exports have been rising on average at a rate of 10% every year and this will
allow the fashion industry to flourish with the exports produced in the Turkish plant.

Open market
Trade is moderately important to Turkey’s economy; the combined value of exports and
imports equals 47 percent of GDP. The average applied tariff rate is 3.2 percent.
Nontariff barriers impede trade. In general, government policies do not significantly
interfere with foreign investment, but investors do face bureaucracy and changes in the
legal and regulatory environment. Financial-system reforms have enhanced transparency
and competitiveness.

Government Size
The top personal income tax rate is 35 percent, and the top corporate tax rate is 20
percent. Other taxes include value-added and environment taxes. The overall tax burden
equals 30.0 percent of total domestic income. Over the past three years, government
spending has amounted to 32.6 percent of total output (GDP), and budget deficits have
averaged 1.7 percent of GDP. Public debt is equivalent to 29.1 percent of GDP.

4
Regulatory Efficiency
In 2016, Turkey reduced the time needed to register a company. Political uncertainty and
security concerns cast a shadow over the business environment. Despite the government’s
attempts to address the issue, child labor remains a problem, particularly in the seasonal
agricultural sector. Turkey has few price controls, but the government sets prices for
products provided by state-owned enterprises and controls prices for some agricultural
products and electricity.

Rule of Law
Secured interests in property are recognized, recorded, and enforced. More than one-
quarter of the country’s judges and prosecutors have been dismissed by presidential
decree since mid-2016 for alleged links to the opposition Gulenist party, and most of
them have been jailed. Corruption, including money laundering, bribery, and collusion in
the allocation of government contracts, remains a major problem.

Political Stability in Turkey

Turkey: Political stability index (-2.5 weak; 2.5 strong)

For that indicator, The World Bank provides data for Turkey from 1996 to 2016. The
average value for Turkey during that period was -1.03 points with a minimum of -2
points in 2016and a maximum of -0.59 points in 2006.

5
Ease of doing Business Index
Turkey is ranked 60 among 190 economies in the ease of doing business, according to the
latest World Bank annual ratings. The rank of Turkey improved to 60 in 2017 from 69 in
2016. Ease of Doing Business in Turkey averaged 66.40 from 2008 until 2017, reaching
an all-time high of 73 in 2009 and a record low of 51 in 2014.

POLITICAL CHALLENGES
Terrorist Attacks:
Terrorists are very likely to try to carry out attacks in Turkey. A number of terrorist
groups are active. Since 2015 there has been an increase in PKK (Kurdish separatist)
terrorist activity in south-east Turkey. There have been a number of attacks by other
groups including suicide attacks by Daesh (formerly referred to as ISIL), attacks by the
far left DHKP(C) and the Kurdish separatist group TAK, including in cities such as
Ankara and Istanbul. Terrorist groups, including Daesh and the TAK, have publicly
threatened to attack tourist sites in Turkey. Attacks could be indiscriminate and could

6
affect places visited by foreigners. There is a heightened risk of terrorist attack against
the aviation industry in Turkey. You should co-operate fully with security officials at
airports. On 1 January 2017, there was an attack on the Reina nightclub in Ortakoy,
Istanbul; 39 people were killed and 69 injured.

Bribery and Corruption:

The Turkish Criminal Code criminalizes various forms of corrupt activity,
including active and passive bribery, facilitation payments, attempted
corruption, extortion, bribing a foreign official, money laundering and abuse of
office. Law on Asset Disclosure, Struggle against Bribery and Corruption, (in Turkish)
and the law on Public Servants, provide regulations for gifts and hospitality. Enforcement
of legislation varies and the government is being criticised for its lack of willingness to
tackle corruption. The OECD Working Group on corruption, expressed concerns about
Turkey’s low levels of enforcement of foreign bribery legislation (OECD 2014).

Political Risk

Turkey: Short-term political risk (1=low, 7=high)

7
For that indicator, Credendo Group provides data for Turkey from 2014 to 2016. The
average value for Turkey during that period was 3 index points with a minimum of 3
index points in 2014 and a maximum of 3 index points in 2014.

I Comparison of Political Risk between Turkey and

Pakistan

INDICATORS Turkey PAKISTAN

 Political stability -2 -2.47

 Ease of doing 60 147

business index
 Political Risk 3 4

As it is evident of above political factors that political conditions of Turkey is far better
than Pakistan. Thus we can say that political risks associated with Turkey are less than
Pakistan.

ECONOMIC RISKS

Economic risk is the chance that macroeconomic conditions like exchange rates,
government regulation, or political stability will affect an investment, usually one in a
foreign country. Economic risk is the one reason that investing in foreign countries carries
more risk than investing within national boundaries. More FDI comes to a country that is
economically, politically and legally stable.

GDP
Turkey is the world’s 18th largest economy with $721 billion GDP. GDP per capita tripled
between 2002 and 2016 to $10,807. The country is known for its booming economy with
its GDP growing more than three times, reaching USD 2.320 Trillion in 2018, up from
USD 231 billion in 2002. Turkey has the world's 17th-largest nominal GDP and 13th-
largest GDP by PPP. The country is a founding member of the OECD (1961) and the G-
20 major economies (1999).
Such a fascinating economic environment is highly attractive to bring in the investment.
The foreign investment in Turkey is growing at a very rapid rate due to these strong

8
economic factors. The CIA classifies Turkey as a developed country. Turkey is often
classified as a newly industrialized country by economists and political scientists; while
Merrill Lynch, the World Bank, and The Economist describe Turkey as an emerging
market economy.

Growth Rate
Following the 2001 economic crisis, 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. In 2015 and 2016, the Turkish economy
grew by 4% and 2.9% respectively. Turkey’s economy has slowed since the failed coup
attempt (which will be explained later). The economy contracted by 1.3% in the third
quarter of 2016, the first contraction since the third quarter of 2009, before growing by
3.5% in the fourth quarter. However, economists expect the growth rate to decrease a bit
in 2018, after a drastic increase in 2017

Investment in Turkey
As the most eastern country in the West and the most western country in the East, Turkey
presents excellent immediate and long-term opportunities for bringing in foreign
investment. Turkey’s growing economy, favorable geographical position and
demography, growing consumer middle class, solid banking sector, and the dynamism of
its entrepreneurial class have made this country a growing market for investors. The
economic structure of Turkey is well supported by the fiscal and monetary policies of the
government. Moreover, the healthy flow of FDI into the country is boosting its economic
development. The Turkish government also plans to implement free trade agreements
(FTAs) with the intention of encouraging foreign and domestic investors and thereby
improving competitiveness. However, despite recent initiatives, such as the easing of
overtime restrictions, the Turkish labor market remains relatively rigid compare to
international standards. Moreover, given its location near Iraq and Syria, the nation
presents a number of risks to foreign travelers and expats.

High flow of Foreign Investment

One of the current economic strengths in Turkey is that there is a high flow of foreign
investment coming from abroad. The investment plays a part in Turkey's speedy
expansion and this has been driving the country's economic growth. In 2008, the
privatization program initiated that allowed the sale of major bridges, highways,
electricity grids and a share in the partly commercial bank. The money generated from
foreign investment is used for expanding the infrastructure of the country; this economic
growth is a big advantage for bringing the foreign investment into Turkey.

Failed Coup Attempt, July 2016

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On 15 July 2016, a coup was attempted in Turkey against state institutions, including the
government and President Recep Tayyip Erdoğan. The attempt was carried out by a
faction within the Turkish Armed Forces that organized themselves as the Peace at Home
Council. They attempted to seize control of several key places in Ankara, Istanbul, and
elsewhere, but failed to do so after some forces loyal to the state defeated them. Such
shocks slowed economic growth sharply to +2.9% in 2016 from +6.1% in 2015.
Notably, the failed coup attempt in July damaged confidence so that real GDP dropped
by -1.3% in Q3. And a severe drop in tourist arrivals against the backdrop of numerous
terrorist attacks and a Russian travel ban (implemented in late 2015, repealed in July
2016) sent real exports and incoming investments down by -2% in full-year 2016.

2015 2016 2017 2018

GDP ($) 859,449M 863,390M 769.5B 2.320T

GDP per capita($) 10,915 859,449 22,021 28,346

GDP growth (%) 6.1 2.9 5.5 4.9

Inflation (yearly average, %) 7.7 7.8 10.9 9.3

Budget balance (% GDP) -1.0 -1.1 -2.0 -1.9

Current account balance (% GDP) -3.7 -3.8 -4.6 -4.3

Public debt (% GDP)* 27.5 28.1 28.5 28.5

In Q1 2017 growth rebounded to +5% y/y, beating the expectations. Unexpectedly strong
rises in private consumption, inward investment and exports were the main triggers for
the surprising Q1 gains. Private consumption was up by +5.1% y/y on the back of
accelerating credit expansion and strong wage gains, although the strong increase
surprised, given the deepening drop in retail sales, at -2.3% in Q1 (after -1.7% in Q4),
and ongoing weak consumer sentiment (Turkstat’s consumer confidence index averaged
66.8 in Q1, vs. 68.8 in Q4 and an average 73.0 since 2011). While domestic demand was
largely sluggish, the growth was fueled by a credit impulse (supported by state loan
guarantees) and new fiscal policies. Furthermore, Turkish lira, which continued to lose
value in 2017 led to higher exports.

Turkey- 2nd largest recipient of FDI

According to the UNCTAD 2017 World Investment Report, Turkey was the second
largest recipient of FDI in West Asia, behind Israel. The country has adopted a series of

10
 Foreign Direct Investment 2014 2015 2016

FDI Inward Flow (million USD) 12,458 17,259 11,987

FDI Stock (million USD) 182,134 149,803 132,882

Number of Greenfield
122 161 154
Investments***

FDI Inwards (in % of GFCF****) 4.6 6.8 4.7

FDI Stock (in % of GDP) 19.5 17.4 15.5

legislative reforms to facilitate the reception of foreign investment, such as the creation of
Investment Support and Promotion Agency of Turkey (ISPAT), a showcase of the
efforts undertaken to attract foreign operators. FDI inflows improved in light of the
development of public-private partnerships for major infrastructure projects, the
measures to streamline administrative procedures and strengthen intellectual property
protection, the end of FDI screening and the structural reforms carried out as part of EU
accession process.

FDI inflows are seen highest in the industrial sector in 2016 and 2017 and the majority of
FDI inflows come from Europe, Africa, North America and the Gulf states. There are
around 53,200 companies with foreign capital that operate in Turkey. This shows the
bunch of people that found initiating a business in Turkey more fascinating and beneficial
in comparison to Pakistan.

After reaching a record high (USD 22 billion) in 2007, FDI flows to Turkey have
decreased. FDI reached USD 13.3 billion in 2016 and dropped to USD 10.8 billion in
2017 according to Turkish Ministry of Economy (2018).The factors hindering FDI
development include political instability (an attempted coup d'état took place in 2016
claiming many lives), the weak currency, inflation, the proximity to conflicts in the
Middle East as well as administrative measures taken against the Gulenists for their
alleged implication in the coup.

11
Turkey’s association with European Union
Turkey’s movement towards the European Union back in 1996 has helped establish and
further the adoption of European business regulations and standards. The association with
EU requires Turkey to adhere to the rules and standards of the EU, which has made the
businesses in Turkey more standardized and formalized.

Government Promotes Investment

Government promotion of investments in technology, textiles, services (health,
education, transit), telecommunications, shipbuilding, electronics and bio-technologies.
This has made a lot of foreign investment move to Turkey.

Turkey-Commercial Hub
Turkey is the commercial hub in the heart of West Asia, which provides access to nearby
markets in the Middle East, Africa and Central Asia. If one invests in Turkey, he can
gradually move the business to the surrounding markets and capture the opportunity to
grow the business.

Comparatively low labor costs

One of the big advantage for investing in Turkey is the low labor costs compared to other
countries. The industries that are highly labor intensive, like software industry, IT
industry, fashion industry etc have a big benefit of investing in Turkey and reap the gains.
Over 30.5 million young, well-educated and motivated professionals, along with the
graduates of vocational and technical training make up the Turkish workforce that
enhances the productivity.

Low taxes & incentives

The government of Turkey reduced the Corporate Income Tax from 33 percent to 20
percent in 2016, which attracted the foreign investors to invest in Turkey. Tax benefits
and incentives in Technology Development Zones, Industrial Zones and Free Zones,
including total or partial exemption from Corporate Income Tax, a grant on employer’s
social security share, as well as land allocation; are the factors that have resulted in
increasing the FDI Inflows in Turkey. Moreover, incentives for strategic investments,
large-scale investments and regional investments are calling in investors to invest in
Turkey instead of Pakistan.

Prudent fiscal and monetary policies

12
Turkey’s economy has significantly benefited from prudent fiscal and monetary policies.
The government has sought to tighten fiscal policies through the significant reduction of
expenditure on public infrastructure development. Furthermore, the government
significantly increased the prime lending rates for commercial banks to extract excess
liquidity out of the market. The Turkish central bank is attempting to lower inflation in
2018 by tightening the fiscal policies and implementing structural reforms that may result
in high productivity growth.

Current Account Deficit

One of the current economic challenges in Turkey is the current account deficit for
Turkey. The import market has seen a quick rise as an outcome of increased global
commodity prices and a sturdy Turkish lira. Turkey is even more vulnerable during times
of global financial doubt. This will be a disadvantage for bringing in the plant into
Turkey as the company may need to relocate if there is a financial crisis which may
happen with Turkey.

CURRENT ACCOUNT BALANCES OF MAJOR EMERGING MARKETS

Exposure to conflicts in Syria

While Turkish trade relations with traditional partners in the EU face complications,
opportunities with newer partners are no sure bet either. Turkey exports about 7.5 percent
of its goods (in dollar value) to Syria and Iraq – two countries whose economies will
likely remain in turmoil for the foreseeable future. Syria, in particular, stands out as a
disappointment. The exposure to such conflicting environments may eventually harm the
Turkish environment and thus hinder any kind of investment there.

13
Political Uncertainty
Political instability is another challenge that has both domestic and international aspects.
The country is divided politically: the ruling AKP has battled major corruption scandals
and riots in recent years and has been seen to become increasingly authoritarian. Added
to which, Turkey also faces problems outside of its borders in neighboring Syria and Iraq.
Iraq is the destination for an increasing share of its exports – 7.1% in 2013 up from 3.0%
in 2008 – with a large proportion of trade stemming from the south-east of Turkey in
particular. Tensions in these two countries have an economic, political and security
impact on Turkey from the cost of supporting refugees through to fears of a spill-over of
sectarian violence.

Inflation rises
Inflation continues to remain above target and was estimated at 10.9% in 2017, reaching
double-digits for the first time in nine years. Inflation is expected to remain high in 2018
but less than 2017 (9.3% according to IMF projections) as high demand, rising cost
pressures and rising inflation expectations exert upward pressure. The Turkish Central
Bank's interest rate hike (up by 500 bps in 2017) was not enough to contain inflation.
Furthermore, foreign financing needs remain high owing to the large current account
deficit, which is expected to stay above 5% of GDP in 2018. With the fiscal stimulus
programmed to be withdrawn in 2018 (i.e. corporate tax rate raised by two points to 22%
for 2018 through 2020) and continued regional and domestic uncertainties, growth is
expected to moderate in 2018 (between 4% and 4.5%). However, 2018 is expected to
witness a significant drop, as private investments have been increasing. The rate of
inflation is also said to reduce due to the tightly managed fiscal policy by the Turkish
Government.

A Labor Market Unfit for Purpose

Although an extensively diverse labor market is known to attract foreign investment in
Turkey, it does pose a challenge too. At 68.1%, Turkey has a large population of working
age, but a low proportion are economically active – 51.3% in 2013. This is due to a
couple of factors including low female participation, with only 32.9% of working age
women in the labor force in 2013. Secondly, the grey economy is large – the Council of
Europe estimated it at 33% of GDP in 2011 – and many jobs are outside of the formal
sector. Youth unemployment is also a challenge, although not one unique to Turkey, and
17.3% of those aged 15-24 were unemployed in 2013. Skills shortages compound these
problems with just 8.8% of the population aged 15+ educated to tertiary level, placing
Turkey below much lower-income countries such as the Philippines, China and Peru in
terms of educational attainment.

14
 COMPARISON OF TURKEY AND PAKISTAN IN
ECONOMIC INDICATORS
INDICATORS USA PAKISTAN
 GDP 2.30 trillion USD which $283.7 billion USD which
ranked 17th in the world ranks 43rd in the world.

 GDP Growth rate 7.3% 4.71%

 Security council Yes (Permanent) ×
member
 CPI based inflation 10.35% 3.3%
rate
 Competitors China, India

 OECD Members  ×
 Members of United  
Nation
 Members of  ×
European Union

15
 SOCIAL SYSTEM
Population
The young and well-educated population of Turkey is considered to be a great asset as
investors are facing considerable challenges elsewhere in Europe, such as ageing and
shrinking populations. Turkey offers excellent opportunities with its growing, young, and
dynamic population -- an indispensable contributor to a strong labor pool and a lucrative
domestic market.

In 2016, Turkey’s population reached 79.8 million. It is expected to top 84 million in

2023, and to peak at 93.5 million in 2050, at which point the population will be more than
double what it was in 1980.

Labor Force

Turkey's labor force is around 30.5 million people, which makes Turkey the 3rd largest
labor force market in Europe.

Turkey’s young population is an important contributor to labor force growth and has
boosted the country’s rank over its competitors. Turkey has posted the largest labor force
growth in relation to EU countries.

16
Turkey: Labor force, million people
The World Bank provides data for Turkey from 1990 to 2017. The average value
for Turkey during that period was 23.48 million people with a minimum of 19.23
million people in 1993and a maximum of 31.28 million people in 2017. See
the global rankings for that indicator or use the comparator to compare trends over
time.

Unemployment Rate
One of the social system challenges in Turkey is that they have a high level of
unemployment.. This is a disadvantage to bring in plant into Turkey due to the high level
of unemployment as they may not be skilled workers in the pool of unemployed people.
There is another side to this where it can become an advantage by hiring these
unemployed and training them to work sufficiently for the company. Turkey
unemployment rate in 2017 is 11.4% which is increasing from past 3 to 4 years.

TECHNOLOGICAL
One of the technological strengths in Turkey is the significant development in the ICT
sector. During 2001-2017, Turkey's ICT sector expanded so rapidly it expanded by
double-digits so that shows that it was a very successful growth. In 2017, Turkey's ICT
market reached $24 billion and in the previous year it reached $21 billion so this shows
that in a space of one year the market grew by $3 billion which is a very substantial
amount of money. The reason for this sharp increase is due to the Turkish
telecommunications sector as they have been privatised by the government. This is an
advantage for the plant being brought into Turkey as this will attract more foreign
investment project as well as creating more jobs for the people of Turkey.

One of the current technological challenges in Turkey is the low expenditure cost on the
research and development. Turkey's research and development cost in 2016 was around
0.6% which is below the average of the European countries which are at an average of

17
2.3%.This is an disadvantage for bringing in the plant into Turkey as there is not that
much investment being put into the Turkish research and development, they will need
investment from both the private and public sector because the country will need to have
a healthily amount of investment in order to grow into a country which is in the EU. In
the future is the research and development cost are still low then this will erode and stop
the competitiveness of different industries in Turkey which will be bad for the long run.

LEGAL SYSTEM
Company Law in Turkey
The main legislative document that regulates the incorporation and activity of companies
in Turkey is the new Commercial Code which entered into force in July 2012 and
replaced the old Code from 1956.

The new law introduced important changes related to the board of directors’ structure in
order to ensure good conditions for the development of the businesses. The changes
aimed to modernize the Turkish legislation and align it with the European Union
legislation and the international standards. These changes have been beneficial and their
main goal was to encourage foreign entrepreneurs to invest in Turkey.

The Commercial Code of 2012 emphasizes the concept of corporate governance. A

greater degree of importance is placed now on the rules and regulations that govern both
non-listed and listed companies in Turkey.

Tax Law

Turkey has one of the most competitive corporate tax rates in the OECD region. The
Turkish corporate tax legislation has noticeably clear, objective and harmonized
provisions which are in line with international standards.

 Individual income tax rate varies from 15% to 35%

18
  In Turkey, the
corporate income tax
rate levied on business
profits is 20%
 Dividend distributions
to individual and
nonresident corporate
shareholders are
subject to withholding
tax (WHT) at a rate of
15%
 Property taxes are paid
each year on the tax
values of land and
buildings at rates
varying from 0.1% to 0.6%

Judicial System
Turkey's judicial system has been wholly integrated with the system of continental
Europe. For instance, the Turkish Civil Code has been modified by incorporating
elements mainly of the Swiss Civil Code and Code of Obligations, and the German
Commercial Code. The Administrative Code bears similarities with its French
counterpart, and the Penal Code with its Italian counterpart.

Rules and Regulations for Business in Turkey

The Commercial Code introduces provisions regarding good management practices and
requirements for internal and independent audit. A company must base its economic and
business activities on transparency, fairness, accountability and responsibility. The Code
contains guidelines regarding:
- Mandatory financial statements;
- The organizational structure of the company;
- The annual audit process;
- The company’s shareholders;
- Structural changes within the company;
- Company division/split-up;
- The liquidation of the company.

These provisions, together with the Articles of Incorporation belonging to a Turkey are
the basis for corporate governance in the country.

19
Rules for foreigners working in Turkey
Foreigners who intend to work in Turkey as an employer, employee, freelancer, or as an
official, are required to declare this circumstance at least 15 days before the start of their
work and have it registered in the Ikamet Tezkeresi (Residence Permit). Foreigners are
required to submit their ID card, residence permit or passport whenever asked by police or
gendarme.
The necessary documents for application of permits should be delivered to the Foreigners’
Office - a sub-unit of General Security Department.

Constitutional rights and obligations

Peoples are equal vis-à-vis laws regardless of any discrimination such as race, language,
religion, sex and so forth.

› The basic rights and freedom of foreigners are to be limited only by law.
› Everyone is entitled to the freedom of worshipping, religion, conscience and
belief.
› Everyone is entitled to claim his rights and defend himself/herself in the Courts.
› Everyone is entitled to work and conclude agreements in whatever field he/she
wishes.
› Everyone is obligated to pay taxes in accordance with his/her financial strength.

Protection of Intellectual Property

Turkey is adapting its legal framework of industrial property to fit with the directives of
the EU. The main advances in this domain are the creation of the Turkish Patent and
Trademark Office (TPTO), the introduction of a regime of penal sanctions and the
updating of the Law on Trademarks through a series of decrees. Since 2008, the Turkish
Government has tried to improve intellectual property regulations. This measure has
attracted many investors to take advantage of the strong legal system of Turkey and invest
there.

Laws of Business Contracts

You must define precisely the rights and duties of the seller and the customer. You must
be particularly vigilant about the law applicable to contracts and the methods of conflict
resolution. Turkey is a signatory to the Vienna Convention on international contracts. The
Turkish legal system is complex, so it is recommended that international laws be used or
an arbitration system be called on. Such formalized and standardized structures make it
rather attractive to invest in Turkey, keeping in view the weak legal system of Pakistan.

20
 ENVIRONMENTAL
One of the environmental strength's in Turkeys is the prosperous biodiversity they have.
Turkey has a very affluent natural resource base and has ranked ninth on biodiversity in
the European countries. Examples of the type of biodiversity they have are not only a
range of wild species but important domestic species such as wheat, lentils, chickpeas,
pears, apple, chestnut and pistachios. The biodiversity has a very great potential for the
development for Turkey and this is an advantage for the plant being brought into Turkey
as this will materials such as cotton to be grown in Turkey and used in the plant so the
material will be home grown and will have a cheaper price and there will be more jobs
created for the company involved in cotton picking.

One of the current environmental challenges in Turkey is the high pollution levels and the
global warming being caused from the pollution levels. The water treatment facilities,
wastewater treatment equipment and solid waste management in Turkey needs urgent
attention as there is high level of environmental pollution as the is an increase in
chemical and detergent overflow and this rises in the air and can cause severe illness to
people who inhale especially in urban areas. The air pollution has increased over the past
since 1990s and is the air pollution is quite severe in the capital of Turkey, Ankara and
other city such as Istanbul. Smog in these cities is due to the increasing number use of
cars. Also there is a lot of industrial air pollution from power plants and facilities used by
the fertilizer, cement and sugar industries which don't have the flirtation equipment
needed to filter out the pollution. Turkey loses out on approximately one billion tons of
topsoil annually and this has an increasingly level of environmental pollution and that
could harm the people and economy of Turkey.

CULTURAL ISSUES TO BE CONSIDERED

There are cultural issues that need to be considered before bringing the plant over to
Turkey. There three main issues in Turkey would be religion, location and gender
equality.

Turkey's main religion is Islam and it is heavily influenced in the many aspect of Turkish
life and it plays a major part of the Turkish people lives. The faith has many restriction
and many special occasions where to celebrate the faith. Where the company will need to
consider if they clothing being manufactured will be able to look good for most of the
Turkish population taste and the dress sense as the faith has many restriction on the type
of clothing worn and will not support inappropriate clothing for the people Turkey.
Especially in the female section there are many restrictions what to cover up and where,
but in recent year the restriction have been very flexible as the country is becoming more
modern and more western.

The location where the plant will be positioned will need to be thought over as there may
have repercussion as there may be houses, schools and mosque nearby so this will create
a bad environment because if the plant was to be made near houses then the community
may be very unhappy with the disruption of the everyday live with a plant being made

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near them. Also the location will need to be considered in terms of pollution so if there
was any pollution then it needs to be well away from people.

Gender equality will need to be considered as the males tend to get paid more than the
female as they feel that they do more. It is serious issue within the Turkish government
but it relate to the Turkish culture on how the males are the dominate species so the
company may need to consider this could be a chance to break the gender barrier and
provide same wages for the female as the males.

CONCLUSION

In conclusion, the company should seriously consider moving the plant into Turkey as it
is still an emerging country that has flaws but has many advantages and over time the
flaws will be sorted out and benefit the company in the long run. The analysis of the
economic, political and legal factors have brought to the conclusion that investing in
Turkey is far better than investing in Pakistan. The favorable environment of Turkey calls
in larger FDI inflows and this makes the investor reap greater profits.

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