With over half of its population enjoying the contemporary westernized lifestyle, modern Turkey is quite similar to many developed countries; its major cities and business centers, farmland, and coastlines closely mirroring population dispersion found in countries such as the United States and Great Britain (Infoplease, 2008, p.1). Turkey’s economic and business climate and recent improvements appear to make it a solid option for foreign direct investment. Several factors come into play when assessing the validity for investment, as discussed subsequently.
COUNTRY CULTURAL AND BUSINESS ATTRIBUTES
Cultural attributes:
Turkey’s population is 99.8% Islam, and 0.2% Christian & Jewish, with a national literacy rate of 87.4% (Infoplease, 2008, p.1). The country possesses a modernized infrastructure system, though some rebuilding is needed, and a support for the free market system. At face value, Turkey appears to be a solid investment option, possessing the culture, structure, systems, and vehicles necessary for successful business operation.
From a religious perspective, text contained in the Koran is supportive of business and the free enterprise system; supporting, in fact the free market system over other economic structures. (Hill, 2008, p.103). There are additional expectations of business however, that Milton Freidman certainly would not endorse. The Koran favors ethical business practices, exercising Corporate Social Responsibility, and stresses charitable activity (Hill, 2008, p.104).
Socio – Economic Attributes:
Again, Turkey’s population possesses an 87.4% Literacy Rate (Infoplease, 2008, p.1). It possesses modern infrastructure, and is dedicated to maintenance and upgrade, as demonstrated by its Increasing budget for public investment in the past years (Infoplease2, 2008, p.6). This increased budget has realized improvements in new highways, airports, and other critical infrastructure to business.
Turkey is a middle income nation, in transition from an agricultural base to a country with more diversified offerings, primarily in global services (Infoplease2, 2008, p.2). In 2001, Turkey experienced a significant economic decline, but with the assistance of World Bank and the International Monetary Fund and their financial structure guidance and involvement, Turkey’s economy emerged more viable than before, stronger and more stable (Infoplease2, 2008, p.2).
Turkey’s deficit was subsequently reduced, and reforms were implemented in such major sectors as financial, energy, telecommunications, etc; and the country saw a shift toward increased privatization (Infoplease2, 2008, p.2). This entire period saw a systemic reduction in economic vulnerabilities, set the platform for the following five years’ sustained 7.5% growth annually, and was a major factor in the increase of Foreign Direct Investment. As a result of these changes, Turkey’s per capita GDP is currently nearing high income levels according to a World Bank study (Turkey Defence & Security Report, 2008, p.49).
Hill (2008) defines Purchasing Power Parity as “an adjustment in gross domestic product per capita to reflect differences in the cost of living”. p.59. Purchasing Power Parity is used to strip away misleading exchange rates, inflation factors, cost of goods, and other differences between countries to allow a viewer to make an apples to apples comparison between countries.
For perspective, below are figures taken from a 2007 World Bank study regarding Purchasing Power Parity. Turkey is approximately equivalent with Mexico in this category, but possesses the business climate, human resources, location, and policies to far exceed the level represented by current data.
Political & Government:
Turkey’s governmental structure and political environment are similar to many westernized countries in a parliamentary or representative approach (Infoplease2, 2008, p.2). The President may serve only one seven year term, and serves as the governmental head. Underneath the President, the Council of Ministers (a parliamentary body) exists, headed by the Prime Minister (structurally second in the chain of political power) (Infoplease2, 2008, p.2). These representatives are chosen by the people, while the President is voted in by the Council of Ministers.
Similar to the United States, political power dispersion, limitation, and judicial checks and balances are built into Turkey’s governmental system. The high court in Turkey’s independent judiciary is the Constitutional Court (Infoplease2, 2008, p.2). There have been allegations that Turkey’s courts are influenceable and not as independent as desired, and that the system is inherently biased because of its disproportionate amount of conservative members, but it is moderately functional and despite slow processes, could be rendered viable and effective with a few modifications (Turkey Business Forecast Report, 2007, p.37). Additionally, Turkish citizens enjoy similar freedoms as constituents of many westernized governments.
Legal attributes:
As stated above, Turkey’s judiciary is similarly to that of the United States. Turkish business law has been significantly improved in recent years, as the government has enacted new policies, such as a recent significant enhancement of intellectual property law (Turkey Business Forecast Report, 2007, p.37).
Results, decisions, and legal interpretations are slow coming out of the judiciary, and are not always uniform and not consistent with precedent (Turkey Business Forecast Report, 2007, p.37). Additionally, there is a widespread belief that Turkish courts are biased against foreign organizations; a significant hurdle for outsiders, considering that legal decisions require local court enforcement (Turkey Business Forecast Report, 2007, p.37).
Turkey’s laws offer enforcement of property rights, though there is often difficulty associated with enforcement. (Turkey Business Forecast Report, 2007, p.37). This includes Intellectual Property Rights enforcement, despite recent attempts to bolster the security of this sector. One significant reason of this problem is the excessively harsh sentencing requirement that judges are hesitant to hand down, which offers little protection against the “continued high levels of piracy and counterfeiting of copyright and trademark materials.” (Turkey Business Forecast Report, 2007, p.37).
Business Climate:
Turkey’s AK Party has enjoyed remaining in power for the significant part of the recent past. This party, led by Prime Minister Tayyip Erdogan possesses a strong business record (Kuser, 2008, p.1). Prime Minister Erdogan initiated Turkey’s quest to join the European Union, oversaw financial restructuring necessary to receive IMF funding, led efforts to incite privatization of many large inefficient state industries, enacted policies resulting in currency stabilization and a reduction in inflation, and led the effort that has produced sustained economic growth (Infoplease2, 2008, p.2).
This table (lines manipulated to show ranks) taken from Hill (2008) gives a general snapshot of business climate from a relative perspective (p.111). Looking at the figures contained in this table, it is apparent that Turkey has a somewhat more collectivist mindset (Individualism Column), and that Turkey has been conditioned, perhaps through past uncertain economic times, to accept somewhat more uncertainty the Americans (Uncertainty Column). Gender work roles are upheld significantly more than in the United States (Masculinity Column), and Turkey allows less inequality and stratification than the United States (Power Distance).
The world has seen a recent increase pull for Corporate Social Responsibility at the international level, a sentiment in line with Turkey’s religions interlacing with business efforts (Drake & Ross, 2003, p.1). Drake & Ross (2003) state that companies “can no longer think exclusively about growing their revenues, profits and numbers, and enhancing shareholder value. They are increasingly expected to pay heed to other stakeholders” (p.2). This attitude is synonymous with Islam’s view of the free market, therefore the Turkish business environment represents one strongly held global ideal.
Employer / employee relations are generally amicable in Turkey, who experiences very few strikes. When an issue does occur, such movements are usually short, and relatively easily resolved (Turkey Business Forecast Report, 2007, p.39). Wages are somewhat low, according to a 2006 World Bank study, and corruption has seen significant recent declines (Turkey Business Forecast Report, 2007, p.38)
Because of recent economic policy changes that have provided more stability and security, Turkey has realized an increase in Foreign Direct Investment (FDI) from one billion dollars in 2001 to almost ten billion dollars in 2005 (Turkey Business Forecast Report, 2007, p.40). Recently, new FDI law changes have decreased admin requirements and awarded foreign businesses the same rights as domestic businesses (Turkey Business Forecast Report, 2007, p.40). This policy change is a significant driver of the continued FDI increase, projected to exceed twenty billion dollars in 2008. (Emerging Europe Monitor, 2008, p.11)
(Turkey Business Forecast Report, 2007, p.40)
Additionally, it is projected that Turkey will sustain its bullish economic trend, realizing approximately 6.5% in annual increases from 2008 – 2012 (Emerging Europe Monitor, 2008, p.11).
Recap and Proposal:
Turkey does possess some political risk, though less than many other developing nations. With an economy in transition, Turkey represents a significant business opportunity. International trade is based upon principles inherent to capitalism, and Turkey continues to progress economically, embodying principles, ideals, and procedures supportive of capitalism.
With the recent boom in FDI in Turkey of over 2,000% in the past few years, it is apparent that other companies have seen this opportunity as well. First Mover Advantages are benefits to initial market entrants (Hill, 2008, p.78), and while first mover benefits may not be a technically precise term applicable in this situation, early mover benefits can still be realized, as Turkey’s economy has nothing but promise ahead. With Turkey’s current economic conditions, strengthening policies, regulations, currency, legal system, and favorable market conditions, future economic growth is certain, and the country possesses the human resources and infrastructure to support such growth. Turkey certainly represents a profitable and hospitable environment welcoming to new business. In weighing the positives and negatives associated with Turkey as a business venue, the positives certainly outweigh the negatives, as the country presents a viable and likely lucrative climate ready to accommodate new international companies and efforts.
References
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