The investment climate of Turkey
The investment climate of Turkey, that forms barriers for any outsider, whether large or small, domestic or foreign, cause problems that affect all economic sectors of the country, particularly the telecommunication sector. The major problems which agitate Turkey’s economy are shortage of well functioning capital market, limited expertise in banking system and technologically oriented companies, partial regulatory process that always intend to restrain new companies and buoy up existing companies, specially those belonging to prominent business families of the country.
Companies in Turkey both the private enterprises and public enterprises specially, suffer from corruption in various levels of the organizational hierarchy. The judicial system of the country, up to some extent, can be suspected to be influenced by external political and commercial mal forces. Growing personal and political relationship between government officials and business representatives form the basis of corruption, which appears to be the most serious problem biting up the economy of the country.
Barriers in investment of the private sectors and the foreign companies in the markets in Turkey is also a matter of concern. The Bilateral Investment Treaty (BIT) between Turkey and United States of America came into force in May 1990. Due to liberal investment regime of turkey, foreign investors are provided with national treatment in the country. In Turkey companies possessing foreign capital are treated as local companies.
Regardless of nationality, private sector investments are always hindered by the facts like political and economical uncertainty, lack of judicial stability, and unwarranted bureaucracy, and high tax rate, unpredictable changes in legal and regulatory environment, fragile framework for corporate governance etc. All areas except finance and petroleum sectors are fully open to foreign participation.
Though the petroleum and financial areas are open to the private sectors and foreign investors in Turkey, Special permission is required for the foreign companies to establish business in these sectors. (Lamb, 2006) Foreign share holders have restricted equity participation ratio, such as near about twenty percent in Broadcasting industry, forty nine percent in aviation, marine transportation and value added telecommunication services industries. Sometimes arbitrary legislative action under cut the rationale for the investments of the foreign companies committed to the Turkish market.
International settlement of investment disputes between foreign investors and the state remain bonded by efforts of the government of turkey, following the inscriptions mentioned in the Bilateral Investment Treaty (BIT) signed by both the concerned parties. For several years the government of Turkey was providing concessions in public services, to the private investors and specially the foreign investors. According to the amendment package passed in the Turkish parliament in the year 1999, the foreign companies investing in Turkish markets were endorsed to access to zero.
By taking this step the government of Turkey proceeded in implementing legislation for arbitration. The Turkish parliament approved a law in the year 2001, further escalating the opportunity of international arbitration in the agreements of the state. A legislation passed by the parliament of Turkey in the year 2003 streamlined the lengthy processes of launch of a company in Turkey. This law also eliminated vetting of foreign investors in approval of a notification procedure, in acquisition of real estate foreign owned entities are not differentiated from the local investors.
The government also brought to an end to minimum capital requests for foreign investors. By the law passed by the Turkish government In the year 2001, fully liberalized energy market will be provided, in which with the approval of a regulatory body, private companies can develop projects. But later no concern was given in this matter and very little progress has been made in privatizing the fields mentioned in the law, such as the power generation sector and the distribution sector. (Lock, 2006)
Turkey is the thirty first largest export markets for goods produced by United States. Foreign Direct Investment (FDI) of United States in Turkey in the year 2002 was $1. 9 billion. Foreign Direct Investment (FDI) of United States mainly concentrated in whole sale manufacturing and banking sectors. Tariff policies of Turkey form quantities restrictions in its import policies. In the year 1996 Turkey go united with the European Union (EU). This makes the country free to apply the external customs of tariff and export as directed by the European Union (EU).
Turkey does not impose duty on non agricultural products from American Free Trade Association (EFTA) and European Union (EU) countries. In the year 2003 the government of Turkey reduced the average tariff for industrial products imported from European Union (EU) countries. This has greatly benefited third country exporters. In order to protect domestic producers Turkish government has maintained a relatively high rate of tariff, near about twenty percent on money, agricultural and food products, for foreign companies.
Highest tariffs are charged on products like alcoholic beverages and animal products. In Turkey Tariffs periodically increased during domestic harvest and also during accumulation of high stock. High tariffs on animal products and high prices of fodder have had a negative affect on livestock industries, especially in beef and poultry farms in Turkey. High duties as well as other domestic charges are levied on alcoholic beverages that add to the whole sale prices. (Lamb, 2007)Sample Essay of PaperHelp