Turkey profile

(Last updated: 22 Apr 2008)

Current business situation

The Department of Foreign Affairs and Trade (DFAT) provides advice for business travellers and tourists going to Turkey. This is regularly updated, and should be checked before planning travel.

Country overview

Capital city:	Ankara
Surface area:	775,000 sq km
Population:	72.6 million
Official language(s):	Turkish
Head of State:	President HE Mr Abdullah Gul
Head of Government:	H.E. Prime Minister Mr Recep Tayyip Erdogan
Australian exports to Turkey:	A$533 million
Australian imports from Turkey:	A$437 million
Turkey's principal export destinations:	Germany, UK, Italy
Turkey's principal import sources:	Russian Federation, Germany, China

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Economic climate

Turkey, in an attempt to become a member of the European Union (EU), is making many changes in regulations and standards. Since the economic crisis in 2001, Turkey adopted reforms and succeeded in creating a strong and stable economy. The strong economy attracting foreign direct investment, a growing and young population with increasing purchasing power is creating opportunities for Australian businesses wanting to enter the Turkish market.

Turkey is currently the 17th biggest economy in terms of its total GDP. A major economic reform program was started within the scope of an IMF stand-by arrangement, following the economic crisis in 2001. The arrangement, covering the period May 2005 - May 2008, provides for US$10 billion of financial support from the fund which will be disbursed in 11 instalments. Successful implementation of the stand-by program accompanied by structural reforms saw the vulnerabilities in the economy decrease and have made the economy more attractive for foreign investment. In 2006, foreign investment inflows into Turkey reached US$19.8 billion, the highest level in Turkey’s history.

Unemployment and underemployment are still major problems. Income disparities and regional disparities are also large, which remain as major problems to be addressed. The unemployment rate is currently around 10 per cent.

Although manufacturing overtook agriculture in the 1980s as the major contributor to GDP, agriculture continues to play a major role in the Turkish economy, especially in employment. Agriculture accounts for around 11 per cent of GDP and 27 per cent of employment. There is a substantial unregistered economy, with estimates of its value ranging from 20 per cent to 50 per cent of economic activity.

Turkey is the EU’s seventh biggest trading partner and its 13th source of imports. EU countries take over 50 per cent of Turkey’s exports and provide almost 50 per cent of imports.

Following a major economic crisis in 2001, when the economy contracted by 9.5 per cent, the Turkish economy grew on average by around 7.5 per cent per annum between 2002-2005. In 2006 GDP growth was 6.1 per cent.

The current account deficit has increased considerably over the last three years from around 0.8 per cent in 2002 to about 7.8 per cent of GDP in 2006.

The reduction in inflation in Turkey has been a major achievement in the past few years, with annual average rate of inflation declining from around 80 per cent in the 1990s to the current level of around 10 per cent, the lowest for the last 35 years.

Banking, social security and taxation reforms continue. Social security reform aims to reduce the pension deficit to less than one per cent of GDP over the long term. Tax reforms, including personal income tax, VAT, corporate tax and financial intermediation tax, aim to improve efficiency, reduce incentives to remain in the informal economy, and offset expected structural decline in revenues as interest rates and revenues from financial intermediation taxes decline. Financial sector reforms include adoption of a new banking law, strengthening of banking regulatory and supervisory authority, and restructuring and privatisation of state banks.

Key economic indicators and statistics for 2007:

• GDP – US$482 billion
• GPD per capita – US$6,548
• Real GDP growth – 5 per cent
• Inflation – 8.2 per cent

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Political climate

Turkey’s political system is based on a separation of powers. The current President is Abdullah Gül, who was elected by parliament on 28 August 2007.

The Republic of Turkey has a unicameral parliament, the Turkish Grand National Assembly (TGNA), with 550 deputies (parliamentarians). Legislative power is vested in the Head of Government and a Council of Ministers (Cabinet) which usually numbers around 35. The Deputies are elected on a first-past-the-post system for a five-year term. Political parties must achieve a national threshold of 10 per cent of the vote to gain representation in the TGNA.

Mr Erdoğan's ‘Justice and Development Party’ (AKP), established in 2001 and first elected in 2002, was returned to power in the general election on 22 July 2007. With almost 47 per cent of the vote, AKP won 340 of the 550 seats in parliament, a majority which allows it to govern in its own right. Voter turnout for the election was high (around 80 per cent).

The only two other parties in the election to exceed the 10 per cent threshold of votes required for parliamentary representation were the Republican People's Party (CHP – 112 seats) and the Nationalist People’s Party (MHP - 71 seats). Also, 23 independent MPs associated with the pro-Kurdish Democrat Society Party (DTP) and four other independents were elected.