Information About Regulation For Implementation Of Foreign Direct Investment Law

Gümülcine Başkonsolosluğu 12.05.2010


Turkey is a country offering significant opportunities for foreign investors with its geographically perfect position to function as a gateway between Europe, Middle East and Central Asia. The opportunities exist not only in the dynamic domestic market, but also throughout the region.

Hospitality and tolerance being the traditional cornerstones of the Turkish way of life, the country is open to foreign investors with many attractions to offer.

- Leading role in the region (zero-problem based relations with the neighbours and the regional countries, facilitating role for the resolution of regional disputes).

- Parliamentary democracy based on multi-party political system.

- Stable political system (single party government since 2002).

- Strong civil society with many NGO’s (more than 40 thousand foundations and over 80 thousand associations are engaged dynamically in a variety of activities in the society ranging from education, culture, arts, health, social welfare to science, technology, research, environment, natural life, sports, women and artisan societies).

- Access to Europe, Caucasus, Central Asia, the Middle East and Nort Africa (From Istanbul, it only takes 4 hours by plane to reach more than 50 countries,- a quarter of the world's population and a quarter of the world's economy).

- Mature and dynamic private sector (high productivity, regional base of many well-known international companies).

- Large and growing domestic market (72,5 million people).

- Supply of young, trained, well educated, motivated and cost effective labour force (61% of the population is under the age of 34 (about 45 million people). Median age is around 28,5 with its over 24 million young workers; the 4th biggest labour force comparing to EU-27, about 500 thousand graduates from 143 different universities per year)

- Liberal and secure investment environment (equal treatment for the domestic and foreign investors. Foreign investors enjoy the same privileges and obligations as the domestic capital; national or international arbitration is allowed, total stock of FDI is more than 205 billion $)

- 15th most attractive FDI destination for 2008-2010 (UNCTAD World Investment Prospects Survey) (Between 2002-2009, total FDI is 85 billion $)

- Potential EU member state in the course of accession negotiations (13 negotiation chapters have been opened since 2005).

- Customs Union with the EU Countries; free trade is possible with other 16 countries+EFTA under Free Trade Agreements.

- Being a member of G-20, non-permanent member of UN Security Council and one of the co-sponsors of the UN-led Alliance of Civilizations initiative, Turkey contributes to the global system through all these three bodies.

- Turkey also has Avoidance of Double Taxation Agreements with 73 countries,

- Developed infrastructure (modern motorways and two-lane highways, extensive railway network with high-speed train services, large and high-standard international airports, new and developed telecommunication infrastructure),

- Competitive tax system (Corporate Income Tax reduced from 30% to 20%; individual Income Tax varies from 15% to 35%; tax benefits and incentives in Technology Development Zones, Industrial Zones and Free Zones -these could include total or partial exemption from Corporate Income Tax, up to 80% grant on employer’s social security share, as well as land allocation-, various incentive schemes at regional and sectoral base).

- Tourism destination for 27 million foreign visitors as of 2009.

- Strong macro-economic fundamentals (fiscal discipline)


I)Short Assessment of Turkish Economy in the Pre-Crisis Period

*The economic crisis that the world has been experiencing over the past two years, is definitely the worst since the World War II in terms of how the financial sector was influenced.

* Turkey initiated comprehensive structural reforms in the aftermath of 2001 crisis which aimed at sustaining macroeconomic stability and improving national economy’s resiliency, productiveness and efficiency. These reforms, without doubt, strengthened the macroeconomic fundamentals. Especially, the soundness of the banking sector provided a buffer against external shocks.

* Significant steps were taken in order to restructure and rehabilitate the banking sector, which was once Turkey’s Achilles Heel. In this context, the government enhanced the financial structure of private banks, restructured state banks and improved the regulatory and supervisory framework.

* The banking sector has achieved much healthier and more robust position through reinforcing its capital structure and implementing effective risk management. In the meantime, decline in the public sector borrowing requirement, thanks to the fiscal discipline, has considerably contributed to the improvement in banking sector’s balance sheet. Turkish banks gradually reduced the share of government securities in total assets and instead extended credits to the real sector and households.

* Political stability, structural reforms, coupled with the prudent and tight fiscal and monetary policy have paved the way for uninterrupted growth till the end of 2008, when the global financial downturn first started. Turkey’s gross domestic product (GDP), which was 230 billion US dollars in 2002, more than tripled and reached 741 billion US dollars at the end of 2008. Moreover, the GDP per capita almost tripled to 10,436 US dollars in 2008. This astounding economic performance achieved in six years placed Turkey as the second fastest growing economy among the OECD member countries.

* Determination of our country towards creating a stable and strong economy, has attracted both domestic and foreign investors. Turkey has emerged as a top investment destination due to the elimination of bureaucratic barriers to a large extent, improvement in tax system, facilitation of profit transfers and successful privatization programs. The total amount of foreign direct investment inflows in the last four years have reached to 70 billion US dollars.

*On the other hand, the total amount of the direct investments by Turkish businessmen and entrepreneurs abroad has reached to 17,3 billion dollars during the last ten years.

* At present, our economy is the 17th largest in the world and 6th largest in Europe. We aim to be among the 10 biggest in the world by the year 2023, in other words by the Republic’s Golden Anniversary.

II)The effects of the global crisis and the recent situation in the Turkish economy

* Due to the global crisis, majority of the emerging markets suffered a significant slowdown in economic activity. Being an open and free-market economy, integrated with the global economic and financial system, Turkey was no exception.

* Turkey is particularly influenced from declining external demand and falling international capital flows.

* Overall growth rate in 2008 decelerated well below the remarkable performance that we achieved between 2002 and 2007. GDP growth slowed down to 1,1 % in 2008, from an average of 4,5% during 2002-2009 period, despite the negative effects of the global financial crisis, prevailing during the last two years. However, we are expecting around 4-4,5% of growth rate in the year 2010.

* Our exports declined to 102 billion dollars in 2009, while it was 132 billion dollars in 2008. The most evident reason behind this drop is, of course, the general decline in external demand, due to the global financial troubles.

* We observe a similar trend of decline in our imports, due to the combined effect of weakening domestic demand and falling prices, especially of energy. Our imports decreased to 141 billion dollars in 2009, from 200 billion dollars of the previous year.

* However, in the last couple of years we have introduced several regional trade development strategies towards neighbouring and surrounding countries, Asia-Pacific region and the continents of Africa and America to ensure durable export growth and diversification of export markets. Those strategies produced successful results. A special priority has been given on increasing our commercial relations with our neighbouring and surrounding countries with which we share common history, same geography and similar culture and traditions. Thanks to these policies, the adverse effects of the current contraction in our traditional markets such as EU economies due to the crisis were kept in minimum levels.

*With our new foreign trade strategy, we aim to grab 1.6 % of the total global trade by reaching an export volume of 500 billion USD in 2023, the year which marks the 100th anniversary of the foundation of the Republic of Turkey.

*When it comes to foreign direct investments, our dynamic economy, large internal market, competitive industry and skilled labor force offer numerous opportunities for foreign investors.

* We have changed the whole legal system in a liberal manner so that foreign investors can come and invest in Turkey without any hesitation.

* Foreign direct investment inflows which were only 1,1 billion US dolar on average between 1993 and 2002, increased gradually afterwards and reached to 20,1 billion US dolar on average between 2006 and 2008. Despite the global downturn, Turkey still managed to receive 7,7 billion $ of direct foreign investment in 2009. The total amount of FDI is 85 billion $ between 2002-2009.

* The number of foreign companies was only around 5.000 in 2001 and this number steadily increased to about 23.500 in the year 2009. We have registered a 25,5% increase in the number of foreign companies during the last two years despite the global economic downturn.

* On the other hand, by the end of 2009, Turkish construction sector has secured more than 161 billion dollars worth of contracts in 81 countries so far. Although 2009 was a difficult year for the construction sector in the global scale, Turkish contractors engaged in many projects abroad, the total amount of which is about 19 billion dollars.

According to the “Top 225 International Contractors" list of Engineering News Record magazine, Turkey is the second country in the world with its 31 firms.

* On the other hand, Turkey's privatization efforts have gained significant momentum in recent years. Privatization portfolio has included major state economic enterprises such as State Tobacco, Salt and Alcohol Enterprises, Turkish Electricity Distribution Company, Turkish Airlines, Turkish Telecom, iron and steel mills and sugar factories. The total revenue generated from the privatization of public assets between 2002 and 2009 is more than 31 billion $.

* Consequently, the impacts of the global financial crisis on the Turkish economy have been fairly limited thanks to the healthy banking sector, prudent fiscal and monetary policy stance, floating exchange rate regime and strong international reserves. The main difference between the Turkish economy and its peers is that we did not transfer any public funds to the banking sector or change the deposit guarantee scheme.

* The current crisis has revealed that the Turkish banking system is in a healthy state and well functioning with its strong capital base and improved risk management system. The absence of toxic assets also prevented the sector from experiencing write-downs.

* While many western banks have lost billions in write-offs, sustained heavy losses and even some collapsed totally, Turkish banks have managed to keep troubles at bay during the global crisis and continued to realize substantial profits. Even foreign banks operating in Turkey posted record profits while their parent companies were busy with write-offs on unpaid loans and credits.

III)Measures Taken By Turkey to Mitigate the Adverse Effects of the Crisis

* Thanks to the strong and resilient features of the Turkish economy which have been outlined above, the adverse effects of the global downturn have been limited as compared to the other countries in the western world which were severely affected.

* Despite that, many measures have been taken by our government and the Central Bank in order to mitigate the adverse effects of the crisis. Besides lowering short-term interest rates, Central Bank of Turkey resumed its intermediary role in the Foreign Exchange Deposit Market, extended the maturity of foreign exchange deposits borrowed by the banks and reduced the lending rate.

* We have undertaken a series of initiatives, such as credit guarantee scheme for enterprises, as well as interventions in the sectors that are under increased pressures. In this context, we have taken immediate action to stem the rise in the non-performing loans, especially loans extended to small and medium sized enterprises.

* Value-added tax and special consumption tax on selected products have been cut temporarily so as to boost the domestic consumption and subsequently revive the economic activities.

* We have doubled the capital of Turkish Eximbank and made some adjustments in interest rates and maturities. In February 2009, "Credit for International Fair Attendance" program was introduced for the exporting firms attending international fairs abroad to market and promote their products.

* We are still working hard to limit the adverse effects of the global economic fluctuations and crisis on our exports, to achieve sustainable export growth and to ensure diversification in exporting sectors and export markets via successful market access operations and innovations.

* With regard to the labor market, we have reduced the financial and non-financial burdens on employers and we have widened the scope of unemployment insurance payments made by the government.

* Furthermore, we have announced a new investment incentive scheme which is quite comprehensive. It involves reduced corporate income taxes, low employment taxes and allocation of treasury land for those investments which will start before the end of 2010.

* On improving innovative capacity, one of the most important steps that we have taken was the introduction of a new and comprehensive Research and Development (R&D) Law in 2008. With this law, Turkey aims to accelerate both foreign and local R&D investments and develop a more conducive environment for innovation. The share of R&D in the general budget has increased 34 times in the last 7 years.

* Positive impacts of these measures have already been observed on the economy and are expected to continue in the upcoming period. Both our own forecasts and international institutions’ forecasts confirm that, the Turkish economy will return to its high growth trajectory once the global economic conditions improve.

* While focusing on mitigating the threats posed by the crisis, Turkey is not losing sight of the long-term vision. With this in mind Turkey has taken the necessary measures that will strengthen country’s macroeconomic fundamentals. In this respect, the Government has announced the Medium Term Program. This program, which covers the 2010-2012 period, outlines fiscal targets for the following three years, exit strategy and forecasts of major macroeconomic variables.

* Main purpose of this program is to establish a framework that will enable Turkey to achieve a sustainable growth rate in the aftermath of the exit from the crisis and to raise the welfare of the society. With this Programme, Turkey has revealed some forecasts pertaining to the key macroeconomic variables.

* According to the Medium Term Programme, the following measures are to be taken to mitigate the adverse affects of the global downturn on the Turkish economy:

a) Public investments will be directed to priority areas and made more efficient.

b) A comprehensive industrial strategy based on technological innovations will be introduced.

c) The resources to transform production structures towards advanced and information technologies will be increased.

d) Reforms in public expenditure policies will be continued. In this regard, health services and expenditures will be made more efficient.

e) Tax base will be extended, and losses and frauds in collecting taxes will be reduced.

f) Training will be accelerated in accordance with the demands of business.

* Given the global economic contraction in 2009, deteriorating domestic and foreign demand and financing facilities, our GDP declined by around 4,7% in 2009. Since it will take time for trade flows and global economy to rebound, recovery in economic activity is expected to be gradual.

* Forecasts reveal annual growth rates of 3.5%, 4% and 5 % for the period 2010-2012, respectively.

* In parallel with this growth perspective we expect that employment will increase by 1.25 million over the following three years. This translates into a certain decline in the unemployment rate by 2012 compared to the level of 14% in 2009.

IV) Conclusion

Despite all its negative consequences, the Turkish economy has shown the resilience and strength in face of the global economic downturn.

Since September 2008, when the first signals of the global crisis appeared, the international rating agencies have downgraded the credit notes of 37 countries, while upgrading the credit notes of 17 countries. Among these 17 countries, Turkey is the only country which has received credit rising for four times.

This is yet another proof that Turkey has pursued the right economic policies during the period of global crisis. In the year 2010, we will enjoy a full recovery from recession, leaving behind the difficulties faced in 2009. IMF and OECD projected a growth rate around 4% for Turkey in 2010. But we believe our economy will achieve higher growth rates than this figure.

As a G-20 member country we will continue to work harder to further strengthen our national economy and make Turkey one of the leading industrial nations in the world during the next decade.

Our goal is to reach a trade volume of 1 trillion dollars by the year 2023, when we celebrate the 100th Anniversary of our Republic and be in the top 10 economies of the world.

By that year, we want to have 10 Turkish brands that are known all across the globe.



Law No. 4884

Date of Endorsement : 11.06.2003

ARTICLE 1- First paragraph of Article 69 of Turkish Commercial Code No: 6762 dated 29/06/1956 has been amended to read as follows:

At the establishment stage of a company, the company books designated in Paragraph1 of Article 66 have to be presented to the trade registry office functioning at the location of the commercial enterprise headquarters or the notary, by the entrepreneur, before using. These books will be endorsed and signed so as to enclose the data stipulated in the provisions regularizing the endorsement of books in the Tax Procedural Law No: 213. Trade registry officer or the notary will inscribe the number of pages constituting each book on its first page and certify thereof with official stamp and his signature. The kind and number of the books/ledgers endorsed by notaries and the names of their owners have to be notified to the related trade registry office within seven days latest. Company books/ledgers for the subsequent year and other books/ledgers will be endorsed according to the provisions regularizing the endorsement of books in the Procedural Tax Law No: 213.

ARTICLE 2- Article 273 of Law 6762 has been amended to read as below:

Article 273 – Establishment of joint stock companies to engage in activities that will be determined and announced by the Ministry of Industry and Commerce are subject to the permit of the Ministry. Amendments to the articles of associations of such companies shall also be subject to the approval of the Ministry. Establishment of other joint stock companies and amendments to the articles of association of these are not subject to permit of the Ministry.

ARTICLE 3 - Article 386 of Law No: 6762 and its title has been amended to read as follows:

2. Announcement and notification:

Article 386 – In case the shareholders meeting has to be summoned so as to amend the articles of association; the amended text has to be announced along with the original text and the concerned persons have to be notified in accordance with Article 368.ARTICLE 4 - First paragraph of Article 510 of Law No: 6762 has been amended as below and the third paragraph of the same article has been repealed:

Managers will apply for registration at the trade registry office functioning at the location of the company headquarters, in accordance with the provisions of Article 31.

ARTICLE 5 - First paragraph of Article 509 and Article 514 (totally) of Law No: 6762 has been repealed.

ARTICLE 6 – Subparagraph 1 of first paragraph of Article 168 of Procedural Tax Law No: 213 dated 04/01/1961 has been amended to read as:

1. Notification of initiation of operation for real persons will be served within ten days following the date of initiation of operation by themselves or by attorneys who are licensed in accordance with Attorneys Law No: 1136 or by members of professions authorized in accordance with Law No: 3568 to the related tax office. Notification of initiation of operation of companies will be served to the related tax office within ten days following the date of initiation of operation by commercial registrars. Notifications of companies including notifications for abandoning business or notifications of changes, except notification of initiation of operation will be served to the related tax office by the taxpayer within one month following the occurrence of the event being notified.

ARTICLE 7- The paragraph below has been supplemented to Article 223 of Law No: 213, to read as:

At the establishment stage of joint stock companies and limited liability companies, the company books will be endorsed by the commercial registrar functioning at the location of the company headquarters or a notary.

ARTICLE 8 - First sentence of first paragraph of Article 224 of Law No: 213 has been amended to read as:

Certification annotations to be made by commercial registrars at the establishment stage of joint stock companies and limited liability companies and certification annotations to be made by notaries will be inscribed on the first page of the books and will contain the following information.

ARTICLE 9 - Paragraph (a) of Article 22 of the Stamp Duty Law No: 488 dated 01/07/1964 has been amended to read as:

a) Within three months following the registration of the articles of association of joint stock companies, partnerships limited by shares and limited liability companies or the resolutions regarding the extension of periods of such,

ARTICLE 10 - The following paragraph has been supplemented, to succeed the second paragraph into Article 3 of Labor Law No: 4857 dated 22/05/2003 to read as:

However, registration of companies shall be made as based on the documents sent by the trade registry offices, and these documents will be sent to the related regional directorate of Ministry of Labour and Social security by the related trade registry office in one month time.

ARTICLE 11 - The following paragraph has been supplemented to succeed the first paragraph of Article 8 of Social Security Law No: 506 dated 17/07/1964 to read as:

Notifications served by companies at company establishment stage, declaring the initiation date of employing insured personnel and the number of such to trade registry offices will be sent to the related department of the Authority by trade registry offices within ten days and this notification will be deemed as served to the Authority by the employer. In case the notification is not sent to the Authority in due time, the related trade registry office will be charged in accordance with Paragraph (a) of Article 140 of this Law.

ARTICLE 12 - The following paragraph has been supplemented to succeed the first paragraph of Article 153 of Law No: 213 to read as:

Trade registry offices will send one copy of the application documents of the establishments that are subject to corporate tax and apply for registration in compliance with Article 30 of Turkish Commercial Code, to the related tax office. Thus, obligation of the taxpayers to notify their initiation of operation is regarded as fulfilled. Procedural penalty provisions on late notification will be applied to trade registrars who do not fulfill their notification obligation on time.

ARTICLE 13 – This Law comes into effect on the date of its publication.

ARTICLE 14 – The provisions of this law will be enforced by the Council of Ministers.


Customs Union with EU member states

E F T A (Iceland, Lichtenstein, Norway, Switzerland)

Bosnia and Herzegovina

Agreements on Bilateral Protection and Protection of Investments

Countries/Date of Entry into Force

1 Albania/December 26, 1996

2 Argentina / May 1, 1995

3 Afghanistan / July 19, 2005

4 Austria / January 1, 1992

5 Azerbaijan / September 8, 1997

6 Bangladesh / June 21, 1990

7 Belarus / February 20, 1997

8 Belgium/Luxembourg / May 4, 1990

9 Bosnia and Herzegovina / January 29, 2002

10 Bulgaria / September 22, 1997

11 China / August 20, 1994

12 Croatia / April 21, 1998

13 Cuba / October 23, 1999

14 Czech Republic / August 1, 1997

15 Denmark / August 1, 1992

16Egypt / July 31, 2002

17 Estonia / April 29, 1999

18 Ethiopia / March 03,2005

19 Finland / April 23, 1995

20 Georgia / July 28, 1995

21 Germany / December 16, 1965

22 Greece / November 24, 2001

23 Hungary / February 22, 1995

24 India / October 18, 2007

25 Indonesia / September 28,1998

26Islamic Republic of Iran / April 13, 2005

27 Israel / August 27, 1998

28 Italy / February 3, 2004

29 Japan / March 12, 1993

30Jordan / January 23, 2006

31 Kazakhstan / August 10, 1995

32Republic of Korea / June 4, 1994

33 Kuwait / April 25, 1992

34 Kyrgyzstan / October 31, 1996

35 Latvia / March 3, 1999

36 Lebanon / January 4, 2006

37 Lithuania / July 7, 1997

38 Republic of Macedonia / October 27, 1997

39 Malaysia / September 9, 2000

40Malta / July 14, 2004

41 Moldova / May 16, 1997

42 Mongolia / May 22, 2000

43 Morocco / May 31, 2004

44 Netherlands / November 1, 1986

45 Pakistan / September 3, 1997

46 Portugal / January 19, 2004

47 Qatar / February 12, 2008

48 Romania / April 7, 1996

49Russian Federation / May 17, 2000

50Slovakia / December 23, 2003

51 Slovenia / June 19, 2006

52 Spain / March 3, 1998

53 Sweden / October 8, 1998

54 Switzerland / February 21, 1990

55 Syria/ January 3, 2006

56 Tajikistan /July 24, 1998

57 Tunisia / April 28, 1994

58 Turkmenistan / March 13, 1997

59Ukraine / May 21, 1998

60United Kingdom / October 22, 1996

61 United States / May 18, 1990

62 Uzbekistan / May 18, 1995

63 Yugoslavia FC / November 10, 2003

64 Algeria / Signed but notentered into force yet

65 Australia / Signed but notentered into force yet

66 Bahrain / Signed but not entered into force yet

67 Chile / Signed but not entered into force yet

68 France / Signed but not entered into force yet

69Kosovo / Signed but not entered into force yet

70 Nigeria / Signed but not entered into force yet

71 Oman / Signed but not entered into force yet

72 Philippines / Signed but not entered into force yet

73 Poland / Signed but not entered into force yet

74Saudi Arabia / Signed but not entered into force yet

75 Singapore / Signed but not entered into force yet

76Republic of South Africa /Signed but not entered into force yet

77 Sudan / Signed but not entered into force yet

78Thailand / Signed but not entered into force yet

79 Yemen / Signed but not entered into force yet

80 U.A.E. / Signed but not entered into force yet

Please also refer the PDF files below:

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