CONDUCTING BUSINESS IN TURKEY: KEY INSIGHTS AND TIPS FOR SUCCESS

INTRODUCTION

Turkey, with its strategic location bridging Europe and Asia, has become an attractive destination for global businesses. With a dynamic economy, favourable demographics, and a government open to foreign investment, Turkey presents unique opportunities across multiple sectors. Turkey has experienced significant economic growth over the past two decades, driven by sectors like manufacturing, construction, and services. The Turkish government has invested heavily in infrastructure, including airports, highways, and renewable energy projects, further supporting industrial growth, and attracting Foreign Direct Investment (“FDI”).

UNDERSTANDING THE TURKISH BUSINESS CULTURE

• Relationship Building: In Turkey, business relationships are often built on a foundation of trust and mutual respect. Networking and relationship-building are considered crucial, and initial meetings are often more about getting to know each other than directly discussing business. Building rapport with local partners or clients can lead to long-term, loyal business relationships.
• Communication Style: Turkish professionals tend to value politeness and are generally indirect in their communication style, especially when dealing with foreign partners. Small talk about family, health, or general well-being is common before diving into business matters. This creates a more personal connection, which is valued in the culture.
• Negotiation Approach: In Turkey, business negotiations are typically flexible, with both sides expected to make compromises. Decision-making can take time, as Turks prefer to consider all aspects before committing. Additionally, decisions are often made by senior management, so it is essential to ensure that the right people are present in meetings for timely outcomes.
• Hierarchical Structures: Turkish companies generally have a hierarchical structure where decisions are made at the top levels. Addressing senior managers with respect and being mindful of titles can help create a favourable impression.
  
  

NAVIGATING LEGAL AND REGULATORY REQUIREMENTS

• Company Formation Options: Foreign investors can establish different types of companies in Turkey, with the Limited Liability Company (“LLC”) being the most popular due to its simplicity and lower capital requirement. Alternatively, the Joint Stock Company (“JSC”) is preferred for larger operations, especially if the business is aiming for future public listing.
• Labor Laws and Employment Regulations: Turkish labour laws prioritize employee rights, including mandatory social security, regulated working hours, and severance pay requirements. Foreign employees need work permits, which companies can apply for on their behalf. Understanding local labour practices and establishing clear employment contracts are essential for compliance.
• Taxation System: Turkey’s corporate tax rate is 25%, with VAT ranging between 1% to 18% depending on the industry. Additionally, the withholding tax on dividends paid to non-residents is around 15%, but this rate can vary with double taxation treaties. Familiarity with these rates and tax filing deadlines can help avoid penalties.
• Intellectual Property Protection: Turkey has made efforts to improve Intellectual Property (“IP”) laws, aligning them with European Union (“EU”) standards, particularly for patents, trademarks, and copyrights. This is crucial for tech companies, exporters, and creative industries as IP laws protect their innovations and ensure competitive advantage in the market.
  
  

KEY INDUSTRIES AND OPPORTUNITIES IN TURKEY

• Manufacturing and Industry: Turkey is a hub for textiles, automotive parts, and household appliances, with companies in these sectors contributing significantly to exports. Automotive manufacturing is supported by companies like Ford Otosan and Tofaş. Investors in these sectors can benefit from Turkey’s skilled workforce and proximity to European markets.
• Tourism and Hospitality: As one of the top tourist destinations in the world, Turkey attracts millions of visitors annually. The country is renowned for its unique blend of historical sites, beaches, and vibrant cities. Opportunities in this sector range from hotels and resorts to niche services such as cultural tourism, wellness retreats, and eco-tourism.
• Agriculture and Agribusiness: Agriculture has long been a cornerstone of Turkey’s economy, with the country ranking among the top global producers of crops like hazelnuts, cherries, and apricots. There are significant opportunities in agribusiness, particularly in organic and processed foods aimed at export markets, and in agricultural technology to improve efficiency and output.
• Technology and Innovation: Turkey’s tech startup ecosystem is thriving, with cities like Istanbul emerging as innovation hubs. E-commerce, fintech, and AI are fast-growing sectors, supported by a network of incubators and government incentives. Companies in these fields can find a market with strong demand for digital solutions and innovative products.
  
  

FINANCING AND BANKING IN TURKEY

• Banking System Overview: Turkey’s banking sector is well-regulated, with a mix of state-owned, private, and foreign banks offering extensive business services. Major banks like Ziraat Bank provide a range of services for foreign businesses, from corporate accounts to project financing.
• Access to Financing: In addition to traditional bank loans, businesses can access funding through private equity, venture capital, and partnerships with local investment funds. The Istanbul Stock Exchange also provides a platform for companies interested in raising funds through equity. International institutions like the European Bank for Reconstruction and Development (“EBRD”) also support projects in Turkey, especially in energy and infrastructure.
• Currency Considerations: The Turkish lira can be volatile, and inflation is a concern. Companies often choose to conduct transactions in foreign currencies, such as USD or EUR, to minimize currency risk. Hedging and forward contracts can also help mitigate currency fluctuation risks.
  
  

CONCLUSION

Turkey offers a wealth of opportunities for businesses looking to expand into a growing and dynamic market. With a strategic location, government support, and diverse economy, Turkey is an ideal destination for both new businesses and established companies. By understanding the local culture, regulatory environment, and market conditions, businesses can successfully navigate and thrive in the Turkish market.