REPUBLIC OF TURKEY PRIME MINISTRY

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1 REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey (ISPAT) Investment Climate and Doing Business in Turkey Murat OZDEMIR Country Advisor Canada June 4th, Montreal

2 AGENDA THE AGENCY TURKEY WITH SOME KEY FIGURES FDI IN TURKEY TOP REASONS TO INVEST IN TURKEY STRUCTURAL REFORMS AND INCENTIVES

The Agency Investment Support and Promotion Agency of Turkey (ISPAT) ANKARA ISTANBUL

(Ankara Istanbul), International representatives network worldwide, Toronto in Canada

professional and dedicated project directors Guidance on: Laws, Regulations, Site

3 The Agency Investment Support and Promotion Agency of Turkey (ISPAT) ANKARA ISTANBUL Attached to the Prime Ministry and reports directly to the Prime Minister 2 offices (Ankara Istanbul), International representatives network worldwide, Toronto in Canada Established in 2007 Private sector approach, result oriented Multi-lingual, professional and dedicated project directors Guidance on: Laws, Regulations, Site Selection, Sectoral Reports, Local Market Players, Potential Partners Confidential, Free of Charge

4 17 th largest economy in the world and 6 th when compared to the EU Countries in 2012 (IMF) The largest youth population when compared to the EU countries

5 33,7 million broadband internet subscribers (Q32013) 69 million GSM users (Q32013) 57 million credit card users (Q32013)

6 Turkey is the 8 th largest steel producer in the world and 2 nd compared with the EU countries (worldsteel 2012) Turkey is the 16 th largest automotive producer in the world (OICA 2012)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Soaring FDI Inflows 135 FDI Inflows ($ billion) 137 000 Number of Companies with Foreign Capital 40.0 37.3 120 35.0 33.8 105 90 75 30.

7 Soaring FDI Inflows 135 FDI Inflows ($ billion) Number of Companies with Foreign Capital (80 years) (11 years) Source: Central Bank of Republic of Turkey & Ministry of Economy

8 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Top reasons to invest in Turkey The fastest recovering economy since the onset of global financial crisis in 2009 Quarterly Real GDP Growth (Index: Q1-2009=100) Seasonally adjusted Dynamic, Stable & Attractive Economy GDP & Income Key numbers Population International Hub Structural Reforms Turkey Brazil Russia Poland Czech Rep. Hungary 95.0 Fastest growing economy in Europe and one of the fastest growing economies in the world Source: Indicators are based on the compilations of OECD, Rosstat, and Turkstat data

90 85 80 75 70 65 60 55 50 45 40 35 60.9 74.0 EU Defined General Government Gross Debt Stock (% of GDP) EU 85,3 10.2 TURKEY 36.1 20022003200420052006200720082009201020112012 12 9 6 3 0 2.

9 EU Defined General Government Gross Debt Stock (% of GDP) EU 85, TURKEY Central Government Budget Deficit (% of GDP) TURKEY EU ,9-2, Annual Inflation (%) 7,4* Unemployment (%) EU Turkey OECD J 03 AJ O J 04 AJ O J 05 AJ O J 06 AJ O J 07 AJ O J 08 AJ O J 09 AJ O J 10 AJ O J 11 AJ O J12AJ O J13AJ O Stability and High Performance in the Economy

10 China India Indonesia Turkey Chile South Africa Korea Argentina Brazil Israel Australia Russia Slovakia Mexico Estonia Poland Norway Sweden Luxembourg New Zealand Czech Rep. Switzerland US Canada OECD Austria UK France Finland Belgium Netherlands Ireland Hungary Germany Slovenia Euro area Denmark Japan Iceland Spain Portugal Italy Greece Top reasons to invest in Turkey Let your business blossom in a thriving economy and promising future Dynamic, Stable & Attractive Economy GDP & Income Key numbers Potential Average Annual Real GDP Growth (%) Forecast Population International Hub Structural Reforms The fastest growing economy among the OECD countries Source: OECD Economic Outlook No.93, May 2013

Top reasons to invest in Turkey A Visionary Economy: Road to 2023 Dynamic, Stable & Attractive Economy GDP & Income Key numbers Population 2,000 1,500 GDP ($ Billion, Current Prices) 2,5 times 2,000

11 Top reasons to invest in Turkey A Visionary Economy: Road to 2023 Dynamic, Stable & Attractive Economy GDP & Income Key numbers Population 2,000 1,500 GDP ($ Billion, Current Prices) 2,5 times 2,000 International Hub Structural Reforms 1, ,5 times ,000 GDP per capita ($) 25, (Target) 20,000 2,5 times 15,000 10,000 3 times 10,504 5,000 3, (Target) Source: TURKSTAT, Hedef 2023

12 Top reasons to invest in Turkey Emergence of a new middle-class Dynamic, Stable & Attractive Economy GDP & Income Key numbers Population International Hub Structural Reforms Number of shopping malls Stock of Consumer Loans* ($ Billion) 4,2 142 Private Consumption per capita ($) Motor Vehicle Sales (thousands) Number of Cars in traffic (million) 4,6 8,6 Airline Passengers (million) Source: OSD, TCSCR, Ministry of Transport, TURKSTAT, CBRT, Ministry of Development *including credit cards

13 Top reasons to invest in Turkey Potential of the Turkish Economy - Young Population - Population Pyramid Dynamic, Stable & Attractive Economy Age Group TURKEY Age Group EUROPE Population Age Labor Force International Hub Structural Reforms % Female Male % Female Male Source: UN and TURKSTAT, 2012 Half of population in Turkey is under age 30

14 Top reasons to invest in Turkey Skilled Labor Force 2012 Dynamic, Stable & Attractive Economy Population Age Labor Force International Hub Structural Reforms Turkey Poland Hungary Romania China Bulgaria Availability of Skilled Labor Force Availability of Qualified Engineers Availability of Competent Senior Managers Turkey 7.6 Turkey 6.1 Poland 6.3 Poland 5.1 Hungary 6.1 Hungary 4.9 Romania 6.0 China 4.7 China 5.7 Romania 4.6 Bulgaria 5.4 Bulgaria 3.5 Source: IMD World Competitiveness Yearbook 2012, IMD WCY Executive Opinion Survey based on an index from 0 to 10

15 Top reasons to invest in Turkey Labor Productivity in Total Economy Dynamic, Stable & Attractive Economy Real GDP per hour worked (Index: 2001=100) Population Age Labor Force International Hub Structural Reforms Turkey Poland Czech Republic Hungary 110 Mexico 95 Source: OECD

16 France Germany Austria Ireland Italy UK Spain Slovenia Czech Rep. Croatia Estonia Slovakia Hungary Poland Turkey Top reasons to invest in Turkey Productive and Cost-effective Labor Force Dynamic, Stable & Attractive Economy 2012 Labor Cost Per Hour in Industry, Population Age Labor Force Construction and Services* ( ) International Hub Structural Reforms Source: Eurostat, TurkStat *Industry, construction and services (except public administration, defense, compulsory social security)

Top reasons to invest in Turkey Access to Multiple Markets 1,5 billion

Economy Population International Hub Access to Multiple Markets Structural

million RUSSIA GDP $2 trillion Import: $335 billion Population: 142 million

ASIA & CAUCASUS GDP: $390 billion Import: $97 billion Population: 82 million

17 Top reasons to invest in Turkey Access to Multiple Markets 1,5 billion people; $25 trillion GDP; $8 trillion trade Dynamic, Stable & Attractive Economy Population International Hub Access to Multiple Markets Structural Reforms EUROPE GDP: $19 trillion Import: $6,5 trillion Population: 670 million RUSSIA GDP $2 trillion Import: $335 billion Population: 142 million MENA GDP: $3,8 trillion Import: $995 billion Population: 675million CENTRAL ASIA & CAUCASUS GDP: $390 billion Import: $97 billion Population: 82 million Source: IMF World Economic Outlook and WTO; GDP, Imports and population figures as of 2012

18 Top reasons to invest in Turkey Business Capital for Regional HQs Multinational Companies (MNCs) Dynamic, Stable & Attractive Economy Population International Hub Access to Multiple Markets Structural Reforms Source: Respective Companies MNCs Number of Countries Managed from Turkey Coca Cola 94 GE Healthcare 80 Microsoft 80 Intel 67 Unilever 36 Verifone 30 GlaxoSmithKline 30 BSH 30 Schneider Electric 27 Alstom 26 Ericsson 22 Cargill 20 Pfizer 20 Volvo 18 BASF 18 PepsiCo 14

19 Top reasons to invest in Turkey Turkey: A Manufacturing Hub Turkey will be the 16 th manufacturing hub in the world and 2 nd in Europe over the next 5 years. T U R K E Y Source: Deloitte TURKEY TURKEY TURKEY

20 Investment Friendly Business Environment with Structural Reforms National Treatment = Guarantee of Transfers Access to Real Estate International Arbitration Freedom to Invest Employment of Expatriates Protection Against Expropriation Research and Innovation Support Corporate Income Tax

21 Top reasons to invest in Turkey New Turkish Commercial Code effective as of July 2012 Dynamic, Stable & Attractive Economy Population International Hub Structural Reforms Transparency Accountability Institutionalization Improvement in investment & business environment Adoption of institutional management principles Opportunity to perform legal procedures electronically

Top reasons to invest in Turkey Turkey in 2003 25 30 35 40 Improving Doing Business: Number of days to set up a company Romania Russia 27 29 Dynamic, Stable & Attractive Economy Bangladesh Bulgaria

22 Top reasons to invest in Turkey Turkey in Improving Doing Business: Number of days to set up a company Romania Russia Dynamic, Stable & Attractive Economy Bangladesh Bulgaria Poland Population International Hub Morocco Cameroon Structural Reforms Turkey Guatemala Turkey in Turkey 13 UK 15 Germany 18 Russia 18 Switzerland 20 Czech Republic 23 Japan 27 India 28 Spain 32 Poland 33 China Source: World Bank Doing Business Reports

Top reasons to invest in Turkey Structural Reforms: Yielding Results & Increasing Competitiveness Dynamic, Stable & Attractive Economy Population International Hub Structural Reforms Year Global

23 Top reasons to invest in Turkey Structural Reforms: Yielding Results & Increasing Competitiveness Dynamic, Stable & Attractive Economy Population International Hub Structural Reforms Year Global Competitiveness Index Number of Countries Turkey s Rank Turkey s Rank (Percentile) , , , , , , , , , ,7 Source: WEF

24 Top reasons to invest in Turkey NEW INVESTMENT INCENTIVES SYSTEM 1. General Incentives 2. Regional Incentives 3. Incentives for large-scale Investments 4. Incentives for Strategic Investments VAT Exemption VAT Exemption VAT Exemption VAT Exemption Custom Duty Exemption Custom Duty Exemption Tax Deduction Employer s share for insurance premium payment Land provision Interest Support (except 1 st and 2 nd regions) Custom Duty Exemption Tax Deduction Employer s share for insurance premium payment Land provision Custom Duty Exemption Tax Deduction Employer s share for insurance premium payment Land provision Interest Support VAT Refund In the 6 th Region; income withholding tax and employee s share for insurance premium payment

25 Investment Incentives V.A.T. Exemption (for Machinery and Equipment) Customs Duty Exemption (for the imported Machinery and Equipment) Reduced Corporate Income Tax (C.I.T. between %2 - %10) Social Security Premium Support (Both Employer s and Employee s Share, for 2 12 years) Land Allocation Interest Support Income Tax Withholding Allowance VAT Refund for Construction Expenses

26 Special Investment Zones Organized Industrial Zones (181 Operational, 95 Under Development) Increased fiscal benefits from Investment Incentives package No VAT for Land Acquisitions, exemption on municipal taxes Lower utility costs Technology Development Zones (34 Operational, 16 Under Development) Income and Corporate Tax exemptions Tax deductible R&D expenditures Social Security Premium exemptions Free Zones (19 Operational, 1 Under Development) Customs duties exemption Corporate tax exemption for manufacturers, income tax exemptions for their employees VAT and Special Consumption tax exemptions

27 Why Turkey? Dynamic, Stable & Attractive Economy Strong Domestic Market International Hub to Access Multiple Markets Investment Friendly Business Environment 27

28 Why Turkey? According to the projection by Goldman Sachs, Turkey will be the 9 th largest economy in the world and the 3 rd largest economy in Europe by China 2.U.S.A. 3.India 4.Brasil 5.Russia 6.Indonesia 7.Mexico 8.U.K. 9.Turkey 10.Japan Source: Goldman Sachs, 2008

29 Why Turkey? The Most Promising Sectors Automotive ; Target to produce over 2 mio vehicles within 5 years Transportation; Highway capacity planned to be trippled up until 2023 with 12 different project Real Estate; Third most attractive real estate investment destination in 2012 (AFIRE); Istanbul is the most attractive real estate investment market in 2012 (PwC, ULI); more than $27 billion FDI over past decade. Finance; Resillent to the global financial crisis with strong regulatory and supervisory framework, the most attractive sector with $39 billion FDI in the past decade; more opportunties with Istanbul Finance Center Energy; Strategic location for energy terminal and corridor; rapidly growing demand: over $100 billion investment is needed to meet the demand till 2023; privatization and diversification opportunities. ICT; Fastest growing IT companies in the region are from Turkey, 27 of the 500 fastest growing tech companies in EMEA are Turkish winner: Logic Bilişim (5-year revenue growth of 28,617% with 412% CAGR).

30 ON

31 THANK YOU FOR YOUR ATTENTION Murat OZDEMIR Country Advisor Canada Phone : Mobile : ozdemir.murat@invest.gov.tr

REPUBLIC OF TURKEY PRIME MINISTRY

REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey ISPAT Investment Climate in Turkey AGENDA Turkey with some key figures FDI in Turkey Top reasons to The Agency Why Turkey?