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Doing Business in Turkey

Doing Business in Turkey: 2014 Country Commercial Guide for U.S. Companies

Doing Business in Turkey

2014 Country Commercial Guide


Market Overview   
                  
As the most eastern country in the West and the most western country in the East, Turkey presents excellent immediate and long-term opportunities for American firms. Turkey’s growing economy, favorable geographical position and demography, growing consumer middle class, solid banking sector, and the dynamism of its entrepreneurial class have made this country a growing market for U.S. exporters. Over 1,000 American firms have made Turkey their home, across virtually all industry sectors. However, like many emerging markets, Turkey presents a range of challenges to doing business, including turbulent politics, occasional civil demonstrations, regional instability, complex bureaucracy, onerous terms and conditions in government contracts, a weakened judicial system, and market access barriers in the strategic life sciences and agricultural sectors. American firms are encouraged to work closely with the U.S. Mission in Turkey to vet potential projects, find qualified partners, and conduct due diligence.

For many decades, the United States and Turkey have enjoyed deep and broad political and military relations. While we do not always agree on every issue, both countries partner closely on a range of regional and international problems. As a NATO member since 1952, Turkey has supported the Alliance’s missions around the world, including Afghanistan, Iraq, the Balkans, and other areas. Turkey’s geographic position makes it an important energy and logistics corridor, linking Europe with the Middle East, the Caucasus and Central Asia. Since 2002, Turkey’s economy has averaged 5% growth, raising average GDP per capita from $3,000 to over $10,000. This has resulted in a boom in infrastructure and consumer spending, as seen in the multiple bridge, airport, hospital, highway, and shopping mall projects around the country. Turkey’s economic growth has fueled increased energy imports, which have widened a Current Account Deficit that presents a structural impediment to long-term growth. Despite the Fed’s Quantitative Easing and other domestic factors, the Turkish economy has thus far proved largely resilient to global economic headwinds. Average economic growth into 2016 is forecast at 4%.

Since 2009, the U.S. and Turkish governments have placed increased emphasis on growing two-way trade and investment. The bilateral Framework for Strategic Commercial and Economic Cooperation (FSECC) is chaired at the Cabinet-level to discuss key areas of strategic economic cooperation. FSECC and other bilateral mechanisms get private sector input through the U.S.-Turkey Business Council, which provides recommendations for increasing trade. U.S.-Turkish trade peaked at nearly $20 billion in 2011, with a modest retreat to just under $19 billion in 2013. Through First Quarter 2014, U.S.-Turkey trade stood at $4.5 billion. Ongoing U.S.-European Union negotiations to conclude the Transatlantic Trade and Investment Partnership (TTIP) are watched closely by Turkey, given its Customs Union with the EU. Turkey remains committed to joining the European Union, however this process has been slow and difficult. While a U.S-Turkey Free Trade Agreement is not being considered at this time, the U.S. has committed to keep Turkey informed of TTIP progress through a joint High Level Committee.

While government efforts are helpful to develop a conducive environment for business, it is ultimately the private sector that will lead growth in trade and investment. In 2014, Sikorsky announced a major 30-year co-production partnership for the Turkish Utility Helicopter Program, worth up to $8 billion over its life cycle. Boeing continues its strategic partnership with Turkish Airlines, which now flies to more countries than any airline in the world. Pratt and Whitney opened a new engine parts facility in Izmir that will supply the Joint Strike Fighter, in which Turkey has partnered. General Electric announced a $900 million investment in Turkey across several of its business lines. American firms are pursuing energy, aerospace, defense and health care projects throughout the country. Since 2011, over 50 American firms, mostly small and medium-size companies, have brought their campaigns to the Turkish market through U.S. Department of Commerce Executive-Led Trade Missions. Turkey sends more students to the United States than any other country in Europe, and two-way tourism is vibrant. The active and influential AMCHAM Turkey (previously known as the American Business Forum in Turkey) has grown to more than 100 members, with regular interaction with the Turkish government on ways to grow trade and investment. Turkish companies are increasingly looking at investments in the United States, which is supported through the SelectUSA program.

To map out the opportunities and better understand the challenges of doing business in Turkey, American firms large and small are encouraged to use the U.S. Mission in Turkey as your long-term business partner. Visiting American firms are encouraged to come to U.S. Mission offices in Adana, Ankara, Istanbul and Izmir to meet with our multi-lingual, sectoral-focused business development teams. For more, go tohttp://export.gov/turkey or http://turkey.usembassy.gov
Challenges
 
The Republic of Turkey is a complex and challenging market requiring adaptability and persistence.

U.S. exporters face many of the same challenges that exist in other semi-developed countries, such as contradictory policies, regulations and documentation requirements, lack of transparency in tenders and other procurement decisions, and a time consuming, unpredictable judiciary and legal and regulatory framework.

Careful planning and patience are the keys to success in Turkey.

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Opportunities
 
The Republic of Turkey’s slow but continued movement toward membership in the European Union has created momentum to adopt European business regulations and standards in Turkey, thereby ultimately making it easier to sell and conduct business in this market. Similarly, reforms since 2001 have created a stronger and more stable economy that has attracted foreign investment, which in turn has been followed by needed capital improvements and demand for new products and services.

The U.S Commercial Service in Turkey has identified a number of market opportunities, described in Chapter 4, for U.S. firms and continues to work with companies to enter the Turkish market, expand market share, or jointly enter third country markets.

Turkey is considered a commercial hub of the region, and U.S. companies should consider using Turkish partners to access business opportunities throughout Central Asia, the Caucasus, the Middle East and even Africa. Turkish partners know these neighboring markets well.

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Market Entry Strategy  
 
While there are many significant opportunities for U.S. companies in Turkey, there are also obstacles impeding entrance into the market. Any market entry strategy for Turkey should begin with a thorough understanding of the costs and benefits to doing business in Turkey.
One of the most successful, proven ways to access the market quickly is to work with an experienced local partner. This partner could be in the form of a local representative, liaison office, agent, or distributor. The local partner can provide knowledge of the local regulatory framework, language assistance and valuable business contacts. As business develops, companies may open subsidiaries and make further local investments to expand their market share.

The U.S. Commercial Service in Turkey has a number of programs and services available to assist American businesses in establishing a presence in this market and developing appropriate contacts. Staffed with experienced Commercial Specialists with many years of industry and sector expertise, the U.S. Commercial Service team in Turkey can tailor your business approach to the right audience, and provide advice on your business strategy in Turkey. To find out more about how the U.S. Commercial Service can assist you in entering this important market, please visit the U.S. Commercial Service Turkey web site atwww.export.gov/turkey .

To conduct a more thorough search for market research reports on specific industries and sectors for Turkey, please consult the Commerce Department’s Market Research Library athttp://www.export.gov/mrktresearch/index.asp.