Turkey provided an appealing market for investors for more than a decade. It experienced strong economic growth on the back of the many positive economic and banking reforms it implemented between 2002 and 2007. After the global economic crisis of 2008-2009, Turkey continued to attract substantial investment as a relatively stable emerging market with a promising trajectory of reforms and a strong banking system.
Despite this progress, over the last several years, economic and democratic reforms have stalled and in some cases regressed. Starting in 2011, Turkey has seen nine years of gross domestic product (GDP) growth. GDP growth was 7.4 percent in 2017 mainly due to government stimulus programs, but it fell to 2.6 percent in 2018 as the economy entered a recession in the second half of the year. While the Government of Turkey projects 2.3 percent GDP growth in 2019, many economists project negative growth. The International Monetary Fund (IMF) predicts the GDP to contract by 2.5 percent in 2019. According to sceptics, the government’s economic policymaking remains opaque, irregular, and sometimes politicized. These factors contributed to a fall in the value of the lira, in addition to inflation of more than 20 percent and unemployment rates over 13 percent. The state of emergency, which had been in effect since the coup attempt in July 2016, ended in July 2018.
Turkey transitioned to a presidential system in July 2018, following a referendum in 2017 and presidential election in June 2018. The opacity of government decision making, lack of confidence in the independence of the central bank, and concerns about the government’s commitment to the rule of law, combined with high levels of foreign exchange-denominated debt held by Turkish non-financial corporates, have made foreign investors cautious leading to historically low levels of foreign direct investment (FDI).
While there are more than 1,700 U.S. businesses active in Turkey, many with long-standing ties to the country, the number of U.S. companies is relatively low given the size of the Turkish economy. Despite the challenging investment climate, there are still positive growth prospects. Some established U.S. companies have increased investment in Turkey in the technology, consumer goods, and aerospace sectors. According to some businesses, due to economic challenges and concerns about the rule of law, arbitrary detentions, and lack of predictability on the political front, many existing firms slowed new investment, and only a few new firms entered the market in 2018. While there was substantial investment in 2018, investment is projected to continue to slow going forward.
The most positive aspects of Turkey’s investment climate are its favorable demographics and prime geographical position, providing access to multiple regional markets. Turkey is also an island of relative stability and growth potential in a turbulent region, making it a desirable hub for regional operations. Turkey has a relatively educated work force, well-developed infrastructure, and a resilient consumption-based economy.
Reportedly, the most negative aspects of Turkey’s investment climate are geopolitical risk and concern over the deterioration of the rule of law and security environment. Many observers remain concerned about transparency, corruption, and reduced judicial independence. In the past few years, especially after the July 2016 coup attempt, the government apparently marginalized critics, confiscated over 1,100 companies worth more than USD 11 billion, and removed more than 130,000 civil servants, often on terrorism-related charges alleging association with Fethullah Gulen. The political focus on transitioning to a presidential system, cross-border military operations in Syria, the worsening economic climate, and persistent questions about the relationship between the United States and Turkey as well as Turkey’s relationship with the European Union (EU), all may negatively affect consumer confidence and investment in the future.
Turkey’s willingness to make progress on needed structural economic reforms will remain key for the country. Government officials will need to make difficult political choices to liberalize the market to align with the goal of modernizing Turkey’s EU Customs Union agreement, itself impacted by worsening relations with EU member states. The government’s push to require manufacturing and data localization in many sectors also impacts foreign investment into the country. Other import issues include tax reform and the decreasing independence of the judiciary and the Central Bank. Turkey hosts 3.5 million Syrian refugees, which creates an additional economic burden on the country as the government provides services such as education and healthcare to refugees.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||78 of 180||https://www.transparency.org/cpi2018|
|World Bank’s Doing Business Report||2018||43 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||50 of 126||https://www.globalinnovationindex.org/analysis-indicator
|U.S. FDI in partner country ($M USD, stock positions)||2017||$4,300||http://www.bea.gov/international/factsheet/
|World Bank GNI per capita||2017||$10,940||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Turkey acknowledges that it needs to attract significant new foreign direct investment (FDI) to meet its ambitious development goals, as well as finance its current account deficit. As a result, Turkey has one of the most liberal legal regimes for FDI in the Organization for Economic Cooperation and Development (OECD). According to the Central Bank of Turkey’s balance of payments data, Turkey attracted a total of USD 6.5 billion of FDI in 2018, almost USD 1 billion down from USD 7.4 billion in 2017. U.S. FDI to Turkey was USD 446 million in 2018, up from a historically low USD 180 million in 2017, as FDI dropped considerably following the 2016 coup attempt. (Note: Official statistics understate the amount of U.S. FDI in Turkey. The Central Bank of the Republic of Turkey estimated, for example, that in 2013 and 2014 U.S. FDI inflows were 30 percent higher than official statistics. End Note.) To attract more FDI, Turkey needs to improve enforcement of international trade rules, ensure the transparency and timely execution of judicial orders, increase engagement with foreign investors on policy issues, and pursue policies to promote strong, sustainable, and balanced growth. It also needs to take other political measures to increase stability and predictability for investors. A stable banking sector, tight fiscal controls, efforts to reduce the size of the informal economy, increase flexibility of the labor market, improve labor skills, and continued privatization of state-owned enterprises have the potential to improve the investment environment in Turkey.
Most sectors open to Turkish private investment are also open to foreign participation and investment. All investors, regardless of nationality, face some challenges: excessive bureaucracy, a slow judicial system, high and inconsistently applied taxes, weaknesses in corporate governance, unpredictable decisions made at the local government level, and frequent changes in the legal and regulatory environment. Structural reforms that will create a more transparent, equal, fair, and modern investment and business environment remain stalled. Venture capital and angel investing are still relatively new in Turkey, but regulators and new legislation should continue to facilitate greater development of these financing opportunities.
Turkey does not screen, review, or approve FDI specifically. However, the government established regulatory and supervisory authorities to regulate different types of markets. Important regulators in Turkey include the Competition Authority; Energy Market Regulation Authority; Banking Regulation and Supervision Authority; Information and Communication Technologies Authority; Tobacco, Tobacco Products and Alcoholic Beverages Market Regulation Board; Privatization Administration; Public Procurement Authority; Radio and Television Supreme Council; and Public Oversight, Accounting and Auditing Standards Authority. Some of the aforementioned authorities screen as needed without discrimination, primarily for tax audits. Screening mechanisms are executed to maintain fair competition and for other economic benefits. If an investment fails a review, possible outcomes can vary from a notice to remedy, which allows for a specific period of time to correct the problem, to penalty fees. The Turkish judicial system allows for appeals of any administrative decision, including tax courts that deal with tax disputes.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no general limits on foreign ownership or control. Nevertheless, there are increasing pressures in some sectors for foreign investors to partner with local companies and transfer technology and some discriminatory barriers to foreign entrants, such as on the basis of “anti-competitive practices,” especially in the information and communication technology (ICT) sector or pharmaceuticals. In many areas, Turkey’s regulatory environment is business-friendly. Investors can establish a business in Turkey irrespective of nationality or place of residence. There are no sector-specific restrictions that discriminate against foreign investor access, which are prohibited by World Trade Organization Regulations.
Other Investment Policy Reviews
In recent years, Turkey has not conducted an investment policy review through the OECD. Turkey’s last investment policy review through the World Trade Organization (WTO) was conducted in March 2016. Turkey has not conducted an investment policy review through the United Nations Conference on Trade and Development (UNCTAD). Turkey has cooperated with the World Bank to produce several reports on the general investment climate that can be found at: http://www.worldbank.org/en/country/turkey/research .
The Republic of Turkey Prime Ministry Investment Support and Promotion Agency (ISPAT) was the official organization for promoting Turkey’s investment opportunities to the global business community and assisting investors before, during, and after their entry into Turkey. Under the new presidential system, the institution has been re-organized and named as the Presidency of the Republic of Turkey Investment Office. Its website is clear and easy to use, with information about legislation and company establishment. (http://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/EstablishingABusinessInTR.aspx ). The website is also a resource for foreigners registering their businesses.
The conditions for foreign investors setting up a business and transferring shares are the same as those applied to local investors. International investors may establish any form of company set out in the Turkish Commercial Code (TCC), which offers a corporate governance approach that meets international standards, fosters private equity and public offering activities, creates transparency in managing operations, and aligns the Turkish business environment with EU legislation and the EU accession process.
Turkey defines micro, small, and medium-sized enterprises according to Decision No. 2018/11828 of the Official Gazette dated June 2, 2018:
- Micro-sized enterprises: fewer than 10 employees and less than or equal to 3 million Turkish lira in net annual sales or financial statement.
- Small-sized enterprises: fewer than 50 employees and less than or equal to 25 million Turkish lira in net annual sales or financial statement.
- Medium-sized enterprises: fewer than 250 employees and less than or equal to 125 million Turkish lira in net annual sales or financial statement.
The government promotes outward investment via investment promotion agencies and other platforms. It does not restrict domestic investors from investing abroad.
3. Legal Regime
Transparency of the Regulatory System
The Government of Turkey (GOT) has adopted policies and laws that, in principle, should foster competition and transparency. The GOT makes its budgetary spending reports available online. Accounting, legal, and regulatory procedures appear to be consistent with international norms, including standards set forth by the International Financial Reporting Standards (IFRS), the EU, and the OECD.
Publicly traded companies adhere to international accounting standards and are audited by well-respected international firms. Copies of draft bills are generally made available to the public by posting them to the websites of the relevant ministry, Parliament, or Official Gazette. Nevertheless, foreign companies in several sectors claim that regulations are applied in a nontransparent manner. In particular, public tender decisions and regulatory updates can be opaque and politically driven, according to critics.
International Regulatory Considerations
Turkey is a candidate for membership in the EU; however, the accession process has stalled, with the opening of new accession chapters put on hold. Some, though not all, Turkish regulations have been harmonized with the EU, and the country has adopted many European regulatory norms and standards. Turkey is a member of the WTO, though it does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).
Legal System and Judicial Independence
Turkey’s legal system is based on civil law, and provides means for enforcing property and contractual rights, and there are written commercial and bankruptcy laws. Turkey’s court system, however, is overburdened, which sometimes results in slow decisions and judges lacking sufficient time to grasp complex issues. Judgments of foreign courts, under certain circumstances, need to be upheld by local courts before they are accepted and enforced. Recent developments reinforce the Turkish judicial system’s need to undertake significant reforms to adopt fair, democratic, and unbiased standards “There were indications the judiciary remained subject to influence, particularly from the executive branch, and faces a number of challenges that limited judicial independence.” See: https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/turkey/
Laws and Regulations on Foreign Direct Investment
Turkey’s investment legislation is simple and complies with international standards, offering equal treatment for all investors. The New Turkish Commercial Code No. 6102 (“New TCC”) was published in the Official Gazette on February 14, 2011. The backbone of the investment legislation is made up of the Encouragement of Investments and Employment Law No. 5084, Foreign Direct Investments Law No. 4875, international treaties and various laws and related sub-regulations on the promotion of sectorial investments. Regulations related to mergers and acquisitions include: a) Turkish Code of Obligations: Article 202 and Article 203, b) Turkish Commercial Code: Articles 134-158, c) Execution and Bankruptcy Law: Article 280, d) Law on the Procedures for the Collection of Public Receivables: Article 30, and e) Law on Competition: Article 7. The government’s primary website for investors is http://www.invest.gov.tr/en-US/Pages/Home.aspx . Although most U.S. investors have not been directly affected to date, there is an increased perception that the government is willing to use its executive authority to interfere in the court system in ways that could affect foreign investors, including favoring domestic companies.
Competition and Anti-Trust Laws
The Competition Authority is the sole authority on competition issues in Turkey and handles private sector transactions. Public institutions are exempt from its authority. The Constitutional Court can overrule the Competition Authority’s finding of innocence in a competition case. There have been some cases of Turkish courts blocking foreign company operations on the basis of anti-competitive claims and a few investigations into foreign companies initiated. Such cases can take over a year to resolve, during which time the companies can be prohibited from doing business in Turkey, benefitting their (local) competitors.
Expropriation and Compensation
Under the U.S.-Turkey Bilateral Investment Treaty (BIT), expropriation can only occur in accordance with due process of law, can only be for a public purpose, and must be non-discriminatory. Compensation must be prompt, adequate, and effective. The GOT occasionally expropriates private real property for public works or for state industrial projects. The GOT agency expropriating the property negotiates the purchase price. If the owners of the property do not agree with the proposed price, they are able to challenge the expropriation in court and ask for additional compensation. There are no known outstanding expropriation or nationalization cases for U.S. firms. Although there is not a pattern of discrimination against U.S. firms, the GOT aggressively targeted businesses, banks, media outlets, and mining and energy companies with alleged ties to the so-called “Fethullah Terrorist Organization” (FETO) and/or the July 2016 attempted coup, including the expropriation of over 1,100 private companies worth more than USD 11 billion.
ICSID Convention and New York Convention
Turkey is a member of the International Center for the Settlement of Investment Disputes (ICSID) and is a signatory of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Turkey ratified the Convention of the Multinational Investment Guarantee Agency (MIGA) in 1987. There are no known arbitration cases involving a U.S. company pending before ICSID. Foreign arbitral awards will be enforced if the country of origin of the award is a New York Convention state, if the dispute is commercial under Turkish law, and as long as none of the grounds under article V of the New York Convention are proved by the opposing party.
Investor-State Dispute Settlement
The U.S.-Turkey BIT ensures that U.S. investors have full access to Turkey’s local courts and the ability to take the host government directly to third-party international binding arbitration to settle investment disputes. There is also a provision for state-to-state dispute settlement. There is limited data about investment disputes available to the U.S. Embassy’s economic team, with only a handful of known cases. Over the last decade, the government has a mixed record of handling investment disputes through international arbitration.
International Commercial Arbitration and Foreign Courts
Turkey adopted the International Arbitration Law, based on the United Nations Commission on International Trade model law, in 2001. Local courts accept binding international arbitration of investment disputes between foreign investors and the state. In practice, however, Turkish courts have been reported to sometimes fail to uphold an international arbitration ruling involving private companies in favor of Turkish firms. There are two main arbitration bodies in Turkey: the Union of Chambers and Commodity Exchanges of Turkey (www.tobb.org.tr ) and the Istanbul Chamber of Commerce Arbitration and Mediation Center (www.itotam.com/en ). Most commercial disputes can be settled through arbitration, including disputes regarding public services. Parties decide the arbitration procedure, set the arbitration rules, and select the language of the proceedings. The Istanbul Arbitration Center was established in October 2015 as an independent, neutral, and impartial institution to mediate both domestic and international disputes through fast track arbitration, emergency arbitrator, and appointments for ad hoc procedures. Its decisions are binding and subject to international enforcement. (www.istac.org.tr/en ).
As of January 2019, some commercial disputes may be subject to mandatory mediation; if the parties are unable to resolve the dispute through mediation, the case moves to a trial.
Turkey criminalizes bankruptcy and has a bankruptcy law based on the Execution and Bankruptcy Code No. 2004 (the “EBL”), published in the Official Gazette on June 19, 1932 and numbered 2128. The World Bank’s Doing Business Report gave Turkey a rank of 109 out of 190 countries for ease of resolving insolvency. See: http://www.doingbusiness.org/data/exploretopics/resolving-insolvency )
5. Protection of Property Rights
Secured interests in property, both movable and real, are recognized and enforced, and there is a reliable system of recording such security interests. For example, real estate is registered with a land registry office. Turkey’s legal system protects and facilitates acquisition and disposal of property rights, including land, buildings, and mortgages, although some parties have complained that the courts are slow to render decisions and are susceptible to external influence. However, following the July 2016 coup attempt, the GOT confiscated over 1,100 companies as well as significant real estate holdings for alleged terrorist ties. Although the seizures did not directly impact many foreign firms, it nonetheless raises investor concerns about private property protections.
The Ministry of Environment and Urbanization enacted a law on title-deed registration in 2012 removing the previous requirement that foreign purchasers of real estate in Turkey had to be in partnership with a Turkish individual or company that owns at least a 50 percent share in the property, meaning foreigners can now own their own land. The law is also much more flexible in allowing international companies to purchase real property. The new law also increases the upper limit on real estate purchases by foreign individuals to 30 hectares and allows further increases up to 60 hectares with permission from the Council of Ministers. As of March 2019, a valuation report, based upon real market value, must be prepared for real estate sales transactions involving buyers that are foreign citizens. To ensure that land has a clear title, interested parties may inquire through the General Directorate of Land Registry and Cadastre (www.tkgm.gov.tr ).
Intellectual Property Rights
In 2018, Turkey continued implementation of its Intellectual Property Rights (IPR) law, the first in modern Turkey’s history, and an important step forward in the country’s IPR development. The law brings together a series of “decrees” into a single, unified, modernized legal structure. It also greatly increases the capacity of the country’s patent office, and improves the framework for commercialization and technology transfer. Turkey also prepared draft legislation on a new Copyright Law. However, while legislative frameworks are improving, IPR enforcement remains lackluster. Turkey remains on the United States Trade Representative (USTR) Special 301 Watch List for 2019 and the Notorious Markets List for 2018. Concerns remain about policies requiring local production of pharmaceuticals, inadequate protection of test data, and a lack of transparency in national pricing and reimbursement. IPR enforcement suffers from a lack of awareness and training among judges and officers, as well as a lack of prioritization relative to terrorism and other concerns. Law enforcement officers also do not have ex officio authority to seize and destroy counterfeit goods, which are prevalent in the local market and the Grand Bazaar. Software piracy is also high.
Additionally, the practice of issuing search-and-seizure warrants varies considerably. Intellectual Property (IP) courts and specialized IP judges only exist in major cities. Outside these areas, the application for a search warrant must be filed at a regular criminal court (Court of Peace) and/or with a regular prosecutor. The Courts of Peace are very reluctant to issue search warrants. Although, by law, “reasonable doubt” is adequate grounds for issuing a search-and-seizure order, judges often set additional requirements, including supporting documentation, photographs, and even witness testimony, which risk exposing companies’ intelligence sources. In some regions, Courts of Peace judges rarely grant search warrants, for example in popular tourist destinations. Overall, according to some investors, it is difficult to protect their rights and general IPR enforcement is deteriorating. For additional information about treaty obligations and points of contact at local IP offices, please see World Intellectual Property Right’s country profiles at http://www.wipo.int/directory/en .
6. Financial Sector
Capital Markets and Portfolio Investment
The Turkish Government strongly encourages and offers an effective regulatory system to facilitate portfolio investment. There is sufficient liquidity in the markets to enter and exit sizeable positions. Existing policies facilitate the free flow of financial resources into the product and factor markets. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is generally allocated on market terms, though the GOT has increased low- and no-interest loans for certain parties, and pressured state-owned banks to increase their lending, especially for public projects and electoral priorities. Foreign investors are able to get credit on the local market. The private sector has access to a variety of credit instruments.
Money and Banking System
The Turkish banking sector, a central bank system, is relatively healthy. The estimated total assets of the country’s largest banks are as follows: Ziraat Bankasi A.S. – USD 106.95 billion, Is Bankasi – USD 98.95 billion, Garanti – USD 83.42 billion, Akbank – USD 77.89 billion, Yapi ve Kredi Bankasi – USD 77.14 billion, Halk Bankasi – USD 72.75, Turkiye Vakiflar Bankasi – USD 67.04 billion. (Conversion rate used was 5.47 TL/1 USD). According to the BDDK, the share of non-performing loans in the sector was approximately 4.03 percent as of March 2019. The only requirements for a foreigner to open a bank account in Turkey are a passport copy and either an ID number from the Ministry of Foreign Affairs or a Turkish Tax ID number. The Turkish Government adopted a framework Capital Markets Law in 2012, aimed at bringing greater corporate accountability, protection of minority-shareholders, and financial statement transparency.
The independent BDDK monitors and supervises Turkey’s banks. The BDDK is headed by a board whose seven members are appointed for six-year terms. Bank deposits are protected by an independent deposit insurance agency, the Savings Deposit Insurance Fund (SDIF). Because of historically high local borrowing costs and short repayment periods, foreign and local firms frequently seek credit from international markets to finance their activities. Foreign banks are allowed to establish operations in the country.
Foreign Exchange and Remittances
Turkish law guarantees the free transfer of profits, fees, and royalties, and repatriation of capital. This guarantee is reflected in Turkey’s 1990 Bilateral Investment Treaty (BIT) with the United States, which mandates unrestricted and prompt transfer in a freely-usable currency at a legal market-clearing rate for all investment-related funds. There is little difficulty in obtaining foreign exchange, and there are no foreign-exchange restrictions, though in 2018, the GOT continued to pressure businesses to conduct trade in lira. An amendment to the Decision on the Protection of the Value of the Turkish Currency was made with Presidential Decree No. 85 in September 2018 wherein the GOT tightened restrictions on Turkey-based businesses conducting numerous types of transactions using foreign currencies or indexed to foreign currencies. The Turkish Ministry of Treasury and Finance may grant exceptions, however. Funds associated with any form of investment can be freely converted into any world currency. The exchange rate is free-floating, though the GOT has taken measures to stabilize the lira when it experiences a period of rapid depreciation.
In Turkey, there have been no recent changes or plans to change investment remittance policies, and indeed the GOT in 2018 actively encouraged the repatriation of funds. The GOT announced “Assets Peace” in May 2018 which incentivized the citizens to bring assets to Turkey in the form of money, gold or foreign currency by eliminating any tax burden on the repatriated assets. There are also no time limitations on remittances. Waiting periods for dividends, return on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees do not exceed 60 days. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue.
Sovereign Wealth Funds
The GOT announced the creation of a sovereign wealth fund (SWF) in August 2016. The controversial fund consists of shares of state owned enterprises (SOEs) and is designed to serve as collateral for raising foreign financing. However, the SWF has not launched any major projects since its inception. In September 2018, the President became the Chairman of the SWF. Several leading SOEs, such as natural gas distributor BOTAS, Turkish Airlines and Ziraat Bank have been transferred to the SWF. Critics worry management of the fund is opaque and politicized.
8. Responsible Business Conduct
In Turkey, responsible business conduct (RBC) is gaining traction and more is being expected of companies. Reforms carried out as part of the EU harmonization process have had a positive effect on laws governing Turkish associations, especially non-governmental organizations (NGOs). However, recent democratic backsliding has reversed some of these gains, and there has been increasing pressure on civil society. Turkey has not yet established a central coordinating office or information agency to assist companies in their efforts, and the topic of RBC is handled by the various ministries. Some U.S. companies have focused RBC activities on improving education in Turkey.
NGOs that are active in the economic sector, such as the Turkish Union of Chambers and Commodity Exchanges (TOBB) and the Turkish Industrialists’ and Businessmen’s Association (TÜSIAD), issue regular reports and studies, and hold events aimed at encouraging Turkish companies to become involved in policy issues. In addition to influencing the political process, these two NGOs also assist their members with civic engagement. The Business Council for Sustainable Development Turkey (http://www.skdturkiye.org/en) and the Corporate Social Responsibility Association in Turkey (www.csrturkey.org ), founded in 2005, are two associations devoted exclusively to issues of responsible business conduct. The Turkish Ethical Values Center Foundation, the Private Sector Volunteers Association (www.osgd.org ) and the Third Sector Foundation of Turkey (www.tusev.org.tr ) also play an important role.
Corruption remains a serious concern to many businesses, a reality reflected in Turkey’s sliding score in recent years in Transparency International’s annual Corruption Perceptions Index, where it ranked 78 of 180 countries and territories around the world in 2018. According to some businesses, government mechanisms to investigate and punish alleged abuse and corruption by state officials remained inadequate, and impunity remained a problem. Though independent in principle, the judiciary remained prone to government, and particularly executive branch, interference, including with respect to the investigation and prosecution of major corruption cases. In some cases, the state of emergency amplified pre-existing concerns about judicial independence. (See the Department of State’s annual Country Reports on Human Rights Practices for more details: https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/turkey/). The government does not actively encourage private companies to establish internal codes of conduct that prohibit bribery of public officials. Turkey is a participant in regional anti-corruption initiatives, specifically co-heading the G20 Anti-Corruption working group with the United States. Under the new presidential system, the Presidential State Supervisory Council is responsible for combating corruption.
Public procurement reforms were designed in Turkey to make procurement more transparent and less susceptible to political interference, including through the establishment of an independent public procurement board with the power to void contracts. Critics claim, however, that government officials have continued to award large contracts to firms friendly with the ruling Justice and Development Party (AKP), especially for large public construction projects.
Turkish legislation outlaws bribery, but enforcement is uneven. Turkey’s Criminal Code makes it unlawful to promise or to give any advantage to foreign government officials in exchange for their assistance in providing improper advantage in the conduct of international business.
The provisions of the Criminal Law regarding bribing of foreign government officials are consistent with the provisions of the Foreign Corrupt Practices Act of 1977 of the United States (FCPA). There are, however, a number of differences between Turkish law and the FCPA. For example, there is no exception under Turkish law for payments to facilitate or expedite performance of a “routine governmental action” in terms of the FCPA. Another difference is that the FCPA does not provide for punishment by imprisonment, while Turkish law provides for punishment by imprisonment from four to twelve years. The Presidential State Supervisory Council, which advises the Corruption Investigations Committee, is responsible for investigating major corruption cases brought to its attention by the Committee. Nearly every state agency has its own inspector corps responsible for investigating internal corruption. The Parliament can establish investigative commissions to examine corruption allegations concerning cabinet ministers; a majority vote is needed to send these cases to the Supreme Court for further action.
Turkey ratified the OECD Convention on Combating Bribery of Public Officials and passed implementing legislation in 2003 to provide that bribes of foreign, as well as domestic, officials are illegal. In 2006, Turkey’s Parliament ratified the UN Convention against Corruption.
Resources to Report Corruption
Contact at government agency or agencies are responsible for combating corruption:
Presidential State Supervisory Council
Beştepe Mahallesi, Alparslan Türkeş Caddesi, Devlet Denetleme Kurulu, Yenimahalle
Telephone: Phone: +90 312 470 25 00
Fax : +90 312 470 13 03
Contact at “watchdog” organization
The Ombudsman Institution
Kavaklidere Mah. Zeytin Dali Caddesi No. 4 Cankaya Ankara
Telephone: +90 312 465 22 00
10. Political and Security Environment
2015 and 2016 was one of the most violent periods in Turkey since the 1970s. However, since January 2017, Turkey has experienced historically low levels of violence when compared to even relatively calm years since the 1970s. Turkey experiences politically motivated violence ranging from coup attempts to attacks on opposition party offices. In July 2016, an attempted coup resulted in the death of more than 240 people, and injured over 2,100 others. Since the July 2015 collapse of the cessation of hostilities between the government and the terrorist Kurdistan Workers’ Party (PKK) [also operating as the Kurdistan People’s Congress (KCK), Kongra Gel (KGK), or via splinter groups like the Kurdistan Freedom Hawks (TAK)], PKK terrorist attacks and violence between government security forces and the PKK have claimed the lives of hundreds of civilians and security forces.
Other U.S.-designated terrorist organizations such as Islamic State of Iraq and Syria (ISIS) and the leftist Revolutionary People’s Liberation Party–Front (DHKP/C) are present in Turkey and conducted attacks in 2015, 2016, and early 2017. The indigenous terrorist organization DHKP/C, established in the 1970s and designated by the U.S. in 1997, is responsible for several attacks against the U.S. Embassy in Ankara and the U.S. Consulate General Istanbul in recent years. The DHKP/C has stated its intention to commit further attacks against the United States, NATO, and Turkey. In addition, violent extremists associated with other groups have transited Turkey en route to Syria.
There have been past instances of violence against religious missionaries and others perceived as proselytizing for a non-Islamic religion in Turkey. Perpetrators have threatened and assaulted Christian and Jewish individuals, groups, and places of worship. Anti-Israeli sentiment remains high.