Executive Summary

Turkey experienced strong economic growth on the back of the many positive economic and banking reforms it implemented between 2002 and 2007, and it weathered the global economic crisis of 2008-2009 better than most countries, establishing itself as a relatively stable emerging market with a promising trajectory of reforms and a strong banking system. However, over the last several years, economic and democratic reforms have stalled and by some measures regressed. GDP growth was 2.6 percent in 2018 as the economy entered a recession in the second half of the year. Challenged by the continuing currency crisis, particularly in the first half of 2019, the Turkish economy grew by only 0.9 percent in 2019. Turkey’s expansionist monetary policy pushed Turkey’s economy to grow by 1.8 percent in 2020 despite the pandemic, though high inflation and persistently high unemployment have been exacerbated. In 2021, Turkey’s GDP grew 11 percent year-over-year (YOY), the highest growth rate in ten years. However, this year growth is expected to be around 3.3 percent, but with significant downside risks. The spending of over USD 100 billion in foreign reserves in a vain attempt to stop the lira’s devaluation, and unorthodox monetary policies that have fueled inflation have left Turkey vulnerable to external shocks.

Despite recent growth, the government’s economic policymaking remains opaque, erratic, and politicized, contributing to long-term and sometimes acute depreciation of the Turkish lira. In September 2021, the Central Bank of Turkey embarked on a series of rate cuts that lowered the key interest rate by 500 basis points, leaving real rates deeply negative. Inflation in 2021 was 48.7 percent and unemployment 11.2 percent, with a slight recovery in labor force participation (52.9 percent).

Macroeconomic instability and the government’s push to require manufacturing and data localization in many sectors have negatively impacted foreign investment into the country. Turkey has maintained its 2020 digital service taxes but agreed to a plan to rescind the tax once pillar one of the OECD Inclusive Framework on a global minimum tax is implemented. Other issues of importance include tax reform and the decreasing independence of the judiciary and the Central Bank.

Laws targeting the Information and Communication Technology (ICT) sector have increased regulations on data, social media platforms, online marketing, online broadcasting, tax collection, and payment platforms. ICT and other companies report Government of Turkey (GOT) pressure to localize data, which the GOT views as a precursor to greater access to user information and source code. Law No. 6493 on Payment and Security Systems, Payment Services, and E-money Institutions also requires financial institutions to establish servers in Turkey to localize data. The Turkish Banking Regulation and Supervision Agency (BDDK) is the authority that issues business licenses if companies localize their IT systems in Turkey and keep the original data (not copies) in Turkey.

Regulations on data localization, internet content, and taxation/licensing have chilled investment by other possible entrants to the e-commerce and e-payments sectors. The laws affect all companies that collect private user data, such as payment information provided online for a consumer purchase.

In 2020, a law requiring social network providers (SNPs) that serve more than one million users in Turkey to appoint a domestic representative entered into force. The SNPs in-country representatives are obliged to accept service of documents from the Information and Communication Technologies Authority (ICTA), which mainly requests removal of content on the grounds of articles 9 and 9/A of local Law No. 5651. The SNP’s country representative must be a Turkish citizen or a legal person registered in Turkey, and easily accessible to local users.

The immediate impact of the COVID-19 pandemic on the economy was sharp, but Turkey managed to contain the number of COVID-19 cases relatively effectively with targeted lockdowns and thanks to its strong health-services infrastructure. The tourism sector, which generates demand for products and various service sectors, was particularly affected. The GOT provided support to protect corporate liquidity, employment, and household incomes. Government investment incentives were refined during the pandemic to attract FDI and encourage green investments. The pandemic exacerbated structural challenges related to high unemployment and the country’s widespread informal economy, which hit the informal sector workers and the self-employed the hardest. While there has been progress in creating quality jobs over the past 15 years, the number of jobs decreased after both the 2018 financial turmoil and because of COVID-19.

Turkey ratified the Paris Agreement in 2021 and continues to make progress on its green initiatives. Turkey’s FDI incentive packages are updated regularly, and in 2021 they were altered to include more incentives targeted at green projects as identified by the Ministry of Industry and Technology.

The opacity and inconsistency of government economic decision making, and concerns about the government’s commitment to the rule of law, have led to historically low levels of foreign direct investment (FDI). While there are still an estimated 1,700 U.S. businesses active in Turkey, many with long-standing ties to the country, the share of American activity is relatively low given the size of the Turkish economy. Investment inflows in 2021 were USD 14.1 billion, an increase of 19 percent from 2019 and the highest rate in the last five years. However, real estate acquisition by foreign nationals accounted for 41 percent of the total inflows in 2021 with USD 5.8 billion, and equity capital inflows were the biggest slice of the FDI pie with USD 7.6 billion. Increased protectionist measures continue to add to the challenges of investing in Turkey. Progress in combatting corruption is also necessary for many of the GOT’s current and future policies to work effectively.

Turkey’s investment climate is positively influenced by its favorable demographics and prime geographical position, providing access to multiple regional markets. Turkey is an island of relative stability in a turbulent region, making it a popular hub for regional operations. Turkey has a relatively educated work force, well-developed infrastructure, and a consumption-based economy.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 96 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 41 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $5,814 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $9,050 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD


1. Openness To, and Restrictions Upon, Foreign Investment

Turkey acknowledges that it needs to attract significant new foreign direct investment (FDI) to meet its ambitious development goals. As a result, Turkey has one of the most liberal legal regimes for FDI among Organization for Economic Cooperation and Development (OECD) members. According to the Central Bank of Turkey’s balance of payments data, Turkey attracted a total of USD 7.59 billion of FDI in 2021, almost USD 1.8 billion higher than 2020’s USD 5.79 billion. The figures demonstrate that Turkey needs to take steps to stabilize its macroeconomic fundamentals, in addition to improve enforcement of international trade rules, ensure the transparency and timely execution of judicial awards, increase engagement with foreign investors on policy issues, and to implement consistent monetary and fiscal economic policies to promote strong, sustainable, and balanced growth. Turkey 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, increased labor market flexibility, improved labor skills, and continued privatization of state-owned enterprises would, if pursued, have the potential to improve the investment environment in Turkey.

Most sectors open to Turkish private investment are also opened to foreign participation and investment. All investors, regardless of nationality, face similar challenges: macroeconomic instability, excessive bureaucracy, a slow judicial system, relatively high and inconsistently applied taxes, and frequent changes in the legal and regulatory environment. Structural reforms that would 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.

Turkey does not screen, review, or approve FDI specifically. However, the government has established regulatory and supervisory authorities to regulate different types of markets. Important regulators in Turkey include the Competition Authority; the Excessive Pricing Evaluation Board; 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. 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 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.

There are no general limits on foreign ownership or control. However, there is increasing pressure in some sectors for foreign investors to partner with local companies and transfer technology, and some discriminatory barriers to foreign entrants, based on “anti-competitive practices,” especially in the information and communication technology (ICT) sector and the pharmaceuticals sector. 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 (WTO) regulations.

The OECD published an Environmental Performance Review for Turkey in February 2019, noting the country was the fastest growing among OECD members, and an Economic Survey of Turkey in 2021, which noted that investor confidence in policy predictability could not be consolidated, and risk premium and exchange rate volatility remained very high. The OECD survey which includes details on policy recommendations can be found at: https://www.oecd.org/turkey/oecd-environmental-performance-reviews-turkey-2019-9789264309753-en.htm 

Turkey’s most recent investment policy review through the World Trade Organization (WTO) was conducted in March 2016. Turkey has cooperated with the World Bank to produce several reports on the general investment climate that can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp431_e.htm 

The International Investors Association (YASED)’s members represent 85 percent of all FDI in Turkey. YASED has a working group structure to support the demands of investors and targets common themes to express investors’ perspectives and concerns to the government to shape the policymaking processes. YASED’s publications can be found at: https://www.yased.org.tr/reports 

The Presidency of the Republic of Turkey Investment Office is the official organization for promoting Turkey’s sectoral investment opportunities to the global business community and assisting investors before, during, and after their entry into Turkey. Its website is clear and easy to use, with information about legislation and company establishment. https://www.invest.gov.tr/en/pages/home-page.aspx

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 as well as with the EU accession process.

Turkey defines micro, small, and medium-sized enterprises according to Decision No. 2022/5315 of the Official Gazette dated March 17, 2022:

  1. Micro-sized enterprises: fewer than 10 employees and less than or equal to 5 million Turkish lira in net annual sales or financial statement.
  2. Small-sized enterprises: fewer than 50 employees and less than or equal to 50 million Turkish lira in net annual sales or financial statement.
  3. Medium-sized enterprises: fewer than 250 employees and less than or equal to 250 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

The GOT has adopted policies and laws that, in principle, should foster competition and transparency. The GOT makes its budgetary spending reports available online. 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. Foreign companies in several sectors; however, claim that regulations are applied in a nontransparent manner. Public tender decisions and regulatory updates can be opaque and politically driven.

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. Turkey is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and is party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

In 2021, Turkey’s Office of the Presidency partnered with the United Nations Development Program (UNDP) to assess the Impact Investing Ecosystem in Turkey and the Sustainable Development Goal (SDG) Investor Map Turkey. These efforts provided preliminary steps towards environmental, social, and governance (ESG) regulations. Turkey’s Capital Markets Board (CMB) amended its Corporate Governance Communique on Turkey’s Sustainability Principles Compliance Framework for publicly traded companies in 2020. The Framework offers publicly traded companies an opportunity to take their social, environmental, and governance impact seriously, beyond shareholders’ demands. There is no standard ESG legal framework but the GOT recommends that all companies operating in Turkey proactively adopt EGT standards.

Turkey is a candidate for EU membership; however, the accession process has stalled, with the opening of new 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).

Turkey’s legal system is based on civil law, provides means for enforcing property and contractual rights, and has written commercial and bankruptcy laws. Turkey’s court system is overburdened, which sometimes results in slow decisions and judges lacking sufficient time to consider 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. The government is currently implementing a series of judicial reform packages introduced since 2019, but Amnesty International noted the reforms “fail to bring Turkey’s laws in line with human rights law and standards, and rather tinker at the edges of a system marked by the deepening erosion of independence of the judiciary.” The judiciary remains subject to influence, particularly from the executive branch, and faces significant challenges that limit judicial independence. The judicial reform strategy’s nine priorities are: protecting and improving rights and freedoms, improving judicial independence, objectivity and transparency, improving both the quality and quantity of human resources, increasing performance and productivity, enabling the right of defense to be used effectively, making justice more approachable, increasing the effectiveness of the penal justice system, simplifying civil justice and administrative procedures, and popularizing alternative mediation methods.

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 February , 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: the Turkish Code of Obligations: Article 202 and Article 203; the Turkish Commercial Code: Articles 134-158; the Execution and Bankruptcy Law: Article 280; the Law on the Procedures for the Collection of Public Receivables: Article 30; and the Law on Competition: Article 7.


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 based on competition concerns, with 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, which benefits their (local) competitors.

The Government of Turkey established a related board, called the Excessive Pricing Evaluation Board, in 2019 and under the authority of the Ministry of Trade. As inflation has increased, exacerbated by the economic impacts of the COVID-19 pandemic, some private sector contacts note a marked increase in the frequency and aggressiveness of audits by the board. The board reportedly uses a “secret comparable,” whereby a product’s price is compared against that of another company whose name is not revealed. In 2021, an increasingly active Competition Authority of Turkey (RK) has stepped up its investigations with the purported intent of protecting consumers from anticompetitive behavior and price gouging. On October 29, 2022, RK fined five supermarkets and one supplier a combined USD 283 million for violating antitrust regulations.

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 has 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 Centre for the Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. 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 if none of the grounds under Article V of the New York Convention are proved by the opposing party.

Investor-State Dispute Settlement

U.S. investors generally have full access to Turkey’s local courts and the ability to take the government directly to international binding arbitration if a breach of the U.S.-Turkey Bilateral Investment Treaty has occurred.

International Commercial Arbitration and Foreign Courts

Turkey adopted the International Arbitration Law, based on the United Nations Commission on International Trade Law (UNCITRAL) 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 sometimes failed to uphold international arbitration awards involving private companies and have favored 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 t 1932, and numbered 2128.

4. Industrial Policies

Turkey’s investment incentives program consists of four main pillars: the General Investment Incentive Scheme, Regional Investment Incentive Scheme, Priority Investment Incentive Scheme, and the Strategic Investment Incentive Scheme. These incentives can provide corporate tax reductions; customs duty exemptions; value added tax (VAT) exemption and VAT refunds; support with the employer’s share social security premiums; income tax withholding allowances; land allocation; and interest rate support for investment loans. The incentive schemes are updated almost every year by the Ministry of Industry and Technology, and the Presidency of the Republic of Turkey Investment Office publishes these offerings on their websites.



Renewable energy investments

Investments in electrical power generation from biomass, solar energy, hydroelectric energy, geothermal energy, and wind energy are supported within the framework of the general incentive system and can receive VAT and customs tax exemptions. Green investments can also receive investment support under Turkey’s Priority Investment Scheme.

Project-Based Investment Incentives

There is a special category of investment incentives that is tailored for projects that will serve the country’s current or future critical needs such as security of supply, reduction of foreign dependency, realization of technological transformation, innovation, and R&D-intensive and high-value-added solutions. Incentives for these types of projects are screened by the Ministry of Industry and Technology and approved by presidential decree.

There are no restrictions on foreign firms operating in any of Turkey’s 18 free zones. The zones are open to a wide range of activities, including manufacturing, storage, packaging, trading, banking, and insurance. Foreign products enter and leave the free zones without imposition of customs or duties if they are exported to third country markets. Income generated in the zones is exempt from corporate and individual income taxation and from the value-added tax, but firms are required to make social security contributions for their employees. Additionally, standardization regulations in Turkey do not apply to the activities in the free zones, unless the products are imported into Turkey. Sales to the Turkish domestic market are allowed with goods and revenues transported from the zones into Turkey subject to all relevant import regulations.

Taxpayers who possessed an operating license as of February 6, 2004, do not have to pay income or corporate tax on their earnings in free zones for the duration of their license. Earnings based on the sale of goods manufactured in free zones are exempt from income and corporate tax until the end of the year in which Turkey becomes a member of the European Union. Earnings secured in a free zone under corporate tax immunity and paid as dividends to real person shareholders in Turkey, or to real person or legal-entity shareholders abroad, are subject to 15 percent withholding tax.


The government mandates a local employment ratio of five Turkish citizens per foreign worker. These schemes do not apply equally to senior management and boards of directors, but their numbers are included in the overall local employment calculations. Foreign legal firms are forbidden from working in Turkey except as consultants; they cannot directly represent clients and must partner with a local law firm. There are no onerous visa, residence, work permits or similar requirements inhibiting mobility of foreign investors and their employees. There are no known government-imposed conditions on permissions to invest.

Recent laws targeting the Information and Communication Technology (ICT) sector have increased regulations on data, social media, online marketing, online broadcasting, tax collection, and payment platforms. ICT and other companies report GOT pressure to localize data, which it views as a precursor to greater GOT access to user information and source code. Law No. 6493 on Payment and Security Systems, Payment Services, and e-money Institutions, also requires financial institutions to establish servers in Turkey to localize data. The Turkish Banking Regulation and Supervision Agency (BDDK) is the authority that issues business licenses if companies localize their IT systems in Turkey and keep the original data (not copies) in Turkey. Regulations on data localization, internet content, and taxation/licensing have resulted in the departure of several U.S. tech companies from the Turkish market and have chilled investment by other possible entrants to the e-commerce and e-payments sectors. The laws potentially affect all companies that collect private user data, such as payment information provided online for a consumer purchase.

Turkey enacted the Personal Data Protection Law in April 2016. The law regulates all operations performed upon personal data including obtaining, recording, storage, and transfer to third parties or abroad. For all data previously processed before the law went into effect, there was a two-year transition period. After two years, all data had to be compliant with new legislation requirements, erased, or anonymized. All businesses are urged to assess how they currently collect and store data to determine vulnerabilities and risks regarding legal obligations. The law created the Data Protection Authority (KVKK), which is charged with monitoring and enforcing corporate data use.

There are no performance requirements imposed as a condition for establishing, maintaining, or expanding investment in Turkey. GOT requirements for disclosure of proprietary information as part of the regulatory approval process are consistent with internationally accepted practices, though some companies, especially in the pharmaceutical sector, worry about data protection during the regulatory review process. Enterprises with foreign capital must send their activity report submitted to shareholders, their auditor’s report, and their balance sheets to the Ministry of Trade, Free Zones, Overseas Investment and Services Directorate, annually by May. Turkey grants most rights, incentives, exemptions, and privileges available to national businesses to foreign business on a most-favored-nation (MFN) basis. U.S. and other foreign firms can participate in government-financed and/or subsidized research and development programs on a national treatment basis.

Offsets are an important aspect of Turkey’s military procurement, and increasingly in other sectors, and such guidelines have been modified to encourage direct investment and technology transfer. The GOT targets the energy, transportation, medical devices, and telecom sectors for the usage of offsets. In February 2014, Parliament passed legislation requiring the Ministry of Science, Industry, and Technology, currently named the Ministry of Industry and Technology, to establish a framework to incorporate civilian offsets into large government procurement contracts. The Ministry of Health (MOH) established an office to examine how offsets could be incorporated into new contracts. The law suggests that for public contracts above USD 5 million, companies must invest up to 50 percent of contract value in Turkey and “add value” to the sector. In general, labor, health, and safety laws do not distort or impede investment, although legal restrictions on discharging employees may provide a disincentive to labor-intensive activity in the formal economy.

5. Protection of Property Rights

Secured interests in property, both movable and real, are generally 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 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 2020, 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 Cadaster.


Turkey continues to implement its intellectual property rights (IPR) law, the Industrial Property Code No. 6769, which entered into force in 2017. 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 (TurkPatent) and improves the framework for commercialization and technology transfer. Turkey is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

However, while legislative frameworks are improving, IPR enforcement remains lackluster. Turkey remains on USTR’s Special 301 Watch List for 2022. 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 do not have ex-officio authority to seize and destroy counterfeit goods, which are prevalent in the local markets. Software piracy is also high.

Additionally, the practice of issuing search-and-seizure warrants varies considerably. IPR courts and specialized IPR judges only exist in major cities. Outside these areas, an application for a search warrant must be filed at a regular criminal court (Courts 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 IPR and general enforcement is deteriorating. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en .

6. Financial Sector

The Turkish Government encourages and offers an effective regulatory system to facilitate portfolio investment. Since the start of 2020, a currency crisis that has been exacerbated by the COVID-19 pandemic, and high levels of dollarization have raised liquidity concerns among some commentators. Existing policies facilitate the free flow of financial resources into 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 stimulating economic growth and public projects. Foreign investors can get credit on the local market. The private sector has access to a variety of credit instruments.

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. Turkish capital markets in 2020 drew growing interest from domestic investors, according to data from the Central Registry Agency (MKK). In 2021, the number of local real investors reached 2.3 million, up an average of 65,200 per month, with the total portfolio value reaching USD 22.2 billion.

The Turkish banking sector remains relatively healthy. The estimated total assets of the country’s largest banks were as follows at the end of 2021: Ziraat Bankasi A.S. – USD 102.69 billion, Turkiye Vakiflar Bankasi – USD 77.08 billion, Halk Bankasi – USD 67.49 billion, Is Bankasi – USD 69.44 billion, Garanti Bankasi– USD 56.78 billion, Yapi ve Kredi Bankasi – USD 58.51 billion, Akbank – USD 57.15 billion. According to the Turkish Banking Regulation and Supervision Agency (BDDK), the share of non-performing loans in the sector was approximately 3.15 percent at the end of 2021, though there appears to have been some regulatory forbearance during the COVID pandemic. The only requirements for a foreigner to open a bank account in Turkey are a passport copy and either an identification number from the Ministry of Foreign Affairs or a Turkish tax identification number.

The 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 (TMSF). 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

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 in Turkey, and there are no foreign-exchange restrictions. Throughout 2021, the GOT continued to encourage 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. A limit on banks’ currency swap, forward and option transactions with non-resident partners at 10 percent of their capital since September 2020. In November 2020, the limit for swaps, forward and option transactions where banks pay Turkish lira at maturity was raised to up to 30 percent, depending on their remaining maturities. Turkey took a variety of such measures to prop up the Turkish lira, including the mandatory surrender and repatriation requirements on FX export proceeds; generally, within 180 days and at least 80 percent had to be surrendered to a local bank in exchange for Turkish liras. In January 2020, the surrender requirement was dropped, but the repatriation requirement remained. However, in January 2022 the Central Bank of the Republic of Turkey (CBRT) announced it would buy 25 percent of all euro, dollar, or British Pound-denominated export income from exporters.

There is no limit on the amount of foreign currency that may be brought into Turkey, but not more than 25,000 Turkish lira or 10,000 euros worth of foreign currency may be taken out without declaration. Although the Turkish lira is fully convertible, most international transactions are denominated in U.S. dollars or euros due to their universal acceptance. Banks deal in foreign exchange and do borrow and lend in foreign currencies. While for the most part foreign exchange is freely traded and widely available, a May 2019 government decree imposed a settlement delay for FX purchases by individuals of more than USD 100,000; there is also a 0.2 percent tax on FX purchases. The settlement delay provision was repealed in December of 2020. Foreign investors are free to convert and repatriate their Turkish lira profits.

The exchange rate was heavily managed by the CBRT with a “dirty float” regime until November 2020, when a new central bank governor assumed responsibility. After several months of increased policy rates, tight monetary policy, and a more stable Turkish lira, the governor was fired, because of which the lira quickly depreciated by 10 percent. Macroeconomic policy has remained largely unpredictable since then.

Remittance Policies

In Turkey, there have been no recent changes or plans to change investment remittance policies. 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.

The GOT announced the creation of a sovereign wealth fund (called the Turkey Wealth Fund, or TVF) in August 2016. Unlike traditional sovereign wealth funds, the controversial fund consists of shares of state-owned enterprises (SOEs) and is designed to serve as collateral for raising foreign financing. However, the TVF has not launched any major projects since its inception. Several leading SOEs, such as natural gas distributor BOTAS, Turkish Airlines, and Ziraat Bank have been transferred to the TVF, which in 2020 became the largest shareholder in domestic telecommunications firm Turkcell. Critics worry management of the fund is opaque and politicized. The fund’s consolidated financial statements are available on its website (https://www.tvf.com.tr/en/investor-relations/reports ), although independent audits are not made publicly available. Firms within the fund’s portfolio appear to have increased their debt loads substantially since 2016. International ratings agencies consider the fund a quasi-sovereign. The fund was already exempt from many provisions of domestic commercial law and new legislation adopted April 16, 2020, granted it further exemptions from the Capital Markets Law and Turkish Commercial Code, while also allowing it to take ownership of distressed firms in strategic sectors. Turkey issued government debt securities worth USD 4.16 billion in April 2019 to support its state banks and TVF injected 21 billion Turkish Lira of additional capital in May 2020 into three public banks engaged in COVID-19 measures (Ziraat, Halkbank and Vakifbank).

8. Responsible Business Conduct

In Turkey, responsible business conduct (RBC) is gaining traction. 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 since the coup attempt.

Turkey has a National Contact Point (NCP), or central coordinating office, to assist companies in their efforts to adopt a due-diligence approach to responsible conduct. The NCP performs informative activities for the introduction of the Economic Cooperation and Development Organization (OECD)’s Guidelines for Multinational Enterprises and finalize the applications of alleged violations regarding the implementation of the Guidelines in an impartial, predictable, and fair manner and in accordance with the principles and standards included in the Guidelines. The Ministry of Industry and Technology’s General Directorate of Incentive Implementation and Foreign Investments is designated as the NCP of Turkey to promote the Guidelines, to examine and resolve complaints.Contact Information for the NCP:

Dr. Mehmet Yurdal ŞahinDirector General of Incentive Implementation and Foreign InvestmentMinistry of Industry and Technology turkeyncp@sanayi.gov.tr  Tel: +90 312 201 6702

NGOs and business associations are active in the economic sector; 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 NGOs 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.

Additional Resources

Department of State

Department of the Treasury

Department of Labor

Climate Issues

Turkey has a Climate Change Action Plan 2011-2023, which can be found at https://webdosya.csb.gov.tr/db/iklim/editordosya/iklim_degisikligi_stratejisi_EN(2).pdf . In addition, the GOT signed the Paris Agreement in 2015 and ratified it on October 6, 2021. Turkey has registered its first non-binding Nationally Determined Contributions (NDCs) within the UN Framework Convention on Climate Change (UNFCCC). The NDC targets announced a 21 percent reduction target in greenhouse gases by 2030. Turkey is on its way to becoming a green energy leader, with 52 percent of installed electricity capacity from renewables and official goals to increase this number, but still lacks a plan to phase out coal power generation. In February 2022, the GOT held its first Climate Council. Coal currently accounts for over 30 percent of Turkey’s electricity production. The EU is Turkey’s biggest external market, and Turkish exporters will be subject to the EU’s carbon border tax, which could be as high as USD 1.8 billion annually, according to the Turkish Industry and Business Association. In August 2021, Turkey adopted a “Green Deal Action Plan” to comply with the European Green Deal. Turkey lacks an emissions trading system.

9. Corruption

Corruption remains a concern, a reality reflected in Turkey’s sliding score in recent years in Transparency International’s annual Corruption Perceptions Index, where it ranked 96 of 180 countries and territories around the world in 2021. 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 subject to government, and particularly executive branch, interference, including with respect to the investigation and prosecution of major corruption cases. (See the Department of State’s annual Country Reports on Human Rights Practices for more details: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/). Turkey is a participant in regional anti-corruption initiatives such as the G20 Anti-Corruption working group. 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 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 prohibits 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 Financial Action Task Force (“FATF”) placed Turkey in October 2021 onto its list of countries subject to increased monitoring. Turkey was added alongside 22 other jurisdictions, for strategic deficiencies in its regime to counter money laundering, terrorist financing, and proliferation financing.

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, several 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 4 to 12 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 make bribing foreign, as well as domestic, officials 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:

Organization: Presidential State Supervisory Council
Address: Beştepe Mahallesi, Alparslan Türkeş Caddesi, Devlet Denetleme Kurulu, Yenimahalle
Telephone number: Phone: +90 312 470 25 00
Fax: +90 312 470 13 03

Name: Seref Malkoc
Title: Chief Ombudsman
Organization: The Ombudsman Institution
Address: Kavaklidere Mah. Zeytin Dali Caddesi No:4 Cankaya ANKARA
Telephone number: +90 312 465 22 00
Email address: iletisim@ombudsman.gov.tr 

10. Political and Security Environment

The period between 2015 and 2016 was one of the more violent times in Turkey since the 1970s. However, since January 2017, Turkey has experienced historically low levels of violence even when compared to past periods of calm, and the country has greatly ramped up internal security measures. Turkey can experience politically motivated violence, generally at the level of aggression against opposition politicians and political parties. A July 2016 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), along with sister organizations like the Kurdistan Freedom Hawks (TAK), have regularly targeted security forces, with civilians often getting injured or killed by PKK and TAK attacks. (Both the PKK and TAK have been designated as terrorist organizations by the United States.)

Other U.S.-designated terrorist organizations such as the Islamic State of Iraq and Greater Syria (ISIS) and the leftist Revolutionary People’s Liberation Party/Front (DHKP/C) are present in Turkey and have conducted attacks in 2013, 2015, 2016, and early 2017. The indigenous Marxist-Leninist insurgent group, DHKP/C, for example, which was established in the 1970s and designated a terrorist organization 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, including a suicide bombing at the embassy in 2013 that killed one local employee. The DHKP/C has stated its intention to commit further attacks against the United States, NATO, and Turkey. Still, widespread internal security measures, especially following the failed July 2016 coup attempt, seem to have hobbled its success. In addition, violent extremists associated with ISIS and other groups transited Turkey enroute to Syria in the past, though increased scrutiny by government officials and a general emphasis on increased security – including a newly constructed 911 km wall along Turkey’s border with Syria – has significantly curtailed this access route, especially when compared to the earlier years of the conflict.

There have been past instances of violence against religious missionaries and others perceived as proselytizing for a non-Islamic religion in Turkey, though none in recent years. On past occasions, perpetrators have threatened and assaulted Christian and Jewish individuals, groups, and places of worship, many of which receive specially assigned police protection, both for institutions and leadership. Anti-Semitic discourse periodically features in both popular rhetoric and public media, and evangelizing activities by foreigners tend to be viewed suspiciously by the country’s security apparatus. However, government officials support religious freedom as policy and points to Turkey’s religious minorities as a sign of the country’s diversity. Religious minority figures periodically meet with the country’s president and other senior members of national political leadership.

11. Labor Policies and Practices

Turkey has a population of 84.7 million, with 22.4 percent under the age of 14 as of 2021. Ninety-three percent of the population lives in urban areas. Official figures put the labor force at 30.9 million in December 2020. Approximately one-fifth of the labor force works in agriculture (17.6 percent) while another fifth works in industrial sectors (20.5 percent). The country retains a significant informal sector at 30.6 percent. In 2021, the official unemployment rate stayed at 12 percent, with 22.6 percent unemployment among those 15-24 years old. Turkey provides twelve years of free, compulsory education to children of both sexes in state schools. Authorities continue to grapple with facilitating legal employment for working-age Syrians, a major subset of the 3.6 million displaced Syrian men, women, and children—unknown numbers of which were working informally.

Women constitute more than half of Turkey’s population, but their labor participation rate stands at 34.5 percent, while male labor participation is 71.8 percent. While most women remain out of the labor market, many are working in the informal economy, which presents unfavorable working conditions that are far from the four pillars of decent work definition of the International Labor Organization (ILO). The EU Delegation, various UN organizations, World Bank, the European Bank for Reconstruction and Development (EBRD), and other international financial institutions (IFIs) in Turkey are working together with multiple stakeholders including the GOT and its related public institutions, on projects related to women. Some provide entrepreneurship funds and vocational-education support, and some initiatives advocate for heightened expectations of local and foreign investors and loan recipients to including a female labor workforce agenda into their business proposals.

Turkey has an abundance of unskilled and semi-skilled labor, and vocational training schools exist at the high school level. There remains a shortage of high-tech workers. Individual high-tech firms, both local and foreign owned, typically conduct their own training programs. Within the scope of employment mobilization, the Ministry of Family, Labor, and Social Services, Turkish Employment Agency (ISKUR) and Turkey Union of Chambers and Commodity Exchanges (TOBB) has launched the Vocational Education and Skills Development Cooperation Protocol (MEGIP). Turkey has also undertaken a significant expansion of university programs, building dozens of new colleges and universities over the last decade.

The use of subcontracted workers for jobs not temporary in nature remained common, including by firms executing contracts for the state. Generally ineligible for equal benefits or collective bargaining rights, subcontracted workers—often hired via revolving contracts of less than a year duration— remained vulnerable to sudden termination by employers and, in some cases, poor working conditions. Employers typically utilized subcontracted workers to minimize salary/benefit expenditures and, according to critics, to prevent unionization of employees.

The law provides for the right of workers to form and join independent unions, bargain collectively, and conduct legal strikes. A minimum of seven workers is required to establish a trade union without prior approval. To become a bargaining agent, a union must represent 40 percent of the employees at a given work site and one percent of all workers in that industry. Certain public employees, such as senior officials, magistrates, members of the armed forces, and police, cannot form unions. Nonunionized workers, such as migrant seasonal agricultural laborers, domestic servants, and those in the informal economy, are also not covered by collective bargaining laws.

Unionization rates generally remain low. Independent labor unions—distinct from their government-friendly counterpart unions—reported that employers continued to use threats, violence, and layoffs in unionized workplaces across sectors. Service-sector union organizers report that private sector employers sometimes ignore the law and dismiss workers to discourage union activity. Turkish law provides for the right to strike but prohibits strikes by public workers engaged in safeguarding life and property and by workers in the coal mining and petroleum industries, hospitals and funeral industries, urban transportation, and national defense. The law explicitly allows the government to deny the right to strike for any situation it determines a threat to national security. Turkey has labor-dispute resolution mechanisms, including the Supreme Arbitration Board, which addresses disputes between employers and employees pursuant to collective bargaining agreements. Labor courts function effectively and relatively efficiently. Appeals, however, can last for years. If a court rules that an employer unfairly dismissed a worker and should either reinstate or compensate him or her, the employer generally pays compensation to the employee along with a fine.

Turkey has ratified key International Labor Organization (ILO) conventions protecting workers’ rights, including conventions on Freedom of Association and Protection of the Right to Organize; Rights to Organize and to Bargain Collectively; Abolition of Forced Labor; Minimum Age; Occupational Health and Safety; Termination of Employment; and Elimination of the Worst Forms of Child Labor. Implementation of a number of these, including ILO Convention 87 (Convention Concerning Freedom of Association and Protection of the Right to Organize) and Convention 98 (Convention Concerning the Application of the Principles of the Right to Organize and to Bargain Collectively), remained uneven. Implementation of legislation related to workplace health and safety likewise remained uneven. Child labor continued, including in its worst forms and particularly in the seasonal agricultural sector, despite ongoing government efforts to address the issue. See the Department of State’s annual Country Reports on Human Rights Practices for more details on Turkey’s labor sector and the challenges it continues to face.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2021 $795,950 2020 $719,920 * www.turkstat.gov.tr
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2021 $1,430 2020 $5,814 BEA data available athttps://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 


Host country’s FDI in the United States ($M USD, stock positions) 2020 $1,557 2020 $2,578 BEA data available at https://www.bea.gov/international/
Total inbound stock of FDI as % host GDP 2019 19.9% 2019 21.9% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World percent20Investment percent20Report/Country-Fact-Sheets.aspx   

* www.tcmb.gov.tr

The IMF’s Coordinated Direct Investment Survey (CDIS) data is not consistent with Turkey’s data as reported by the Central Bank of the Republic of Turkey, which can be found at: https://www.tcmb.gov.tr/wps/wcm/connect/TR/TCMB+TR/Main+Menu/Istatistikler/Odemeler+Dengesi+ve+Ilgili+Istatistikler/Uluslararasi+Yatirim+Pozisyonu/

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data (through 2020)
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 124923 100% Total Outward 50,726 100%
Qatar 32,445 26% North Macedonia 19,668 39%
North Macedonia 17,994 4% United Kingdom 5,211 10%
United Kingdom 13,083 10% Germany 2,561 5%
Germany 9,360 7% Austria 2,286 .5%
Luxembourg 5,291 4% Jersey 2,285 4.5%
“0” reflects amounts rounded to +/- USD 500,000.

IMF’s Coordinated Direct Investment Survey (CDIS) data available at: http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1482331048410

14. Contact for More Information:

Economic Specialist
American Embassy Ankara
110 Atatürk Blvd.
Kavaklıdere, 06100 Ankara – Turkey
Phone: +90 (312) 455-5555
Email: Ankara-ECON-MB@state.gov

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