Turkey - Overview

An Expert's View about Business Environment in Turkey

Posted on: 30 Sep 2012

Recent Developments
• Thanks to its low interest rate environment and the subsequent buoyancy of investment, Turkey, underpinned also by strong-than-expected exports, registered remarkable GDP growth in the past two years of global economic turbulence. Looking ahead, widening trade imbalances, accelerating inflation and weak demand in its main export markets are going to rein in the Turkish economy. Alongside with a more restrictive monetary and fiscal policy mix, Turkey is forecast to see a more humble GDP growth of 3.2% in 2012.
• Hong Kong's total exports to Turkey slid by 11% to US$450 million in the first seven months of 2012, and imports from Turkey also fell by 14% to US$206 million.

Current Economic Situation

Thanks largely to the nascent global recovery and its low interest rates and sustained public spending ahead of general election in June 2011, the Turkish economy ended last year with strong GDP growth of 8.5%. Under the dark cloud of the European sovereign debt crisis and the political uncertainty in the Middle East and North Africa (MENA) region, however, the sharp improvements of labour and credit market conditions have shown signs of cooling in recent months, while industrial production has faltered in light of slowing demand from its major export markets.

With a more restrictive monetary and fiscal policy mix coming into play to rein in inflation and external imbalances, Turkey is forecast to see growth moderate to a more sustainable pace in the balance of 2012. The tightening credit conditions and the uninspiring economic conditions in many of its trading partners are set to limit the contribution to growth of investment, industrial production and exports, while the deteriorating employment prospects and higher lending rates are set to cool domestic demand. On the whole, Turkey is forecast to see a slower growth of 3.2% in 2012.

Trade Policy

Turkey has significantly liberalised its import regime, especially in the last decade. Any individual or enterprise can freely register to engage in the import business. It is a member of the WTO, and its tariff scheme is based on the Harmonised System (HS) for commodity coding.

EU-Turkey Customs Union

The EU-Turkey Customs Union came into force in January 1996, under which Turkey and the EU have abolished all customs duties, other surcharges and import quotas levied on most manufactured products from each other. Turkey has also adopted the EU’s Common External Tariffs imposed on imports from third countries and economies. Products imported from sources other than the EU and Turkey can thus move freely within the EU and Turkey, if all import formalities have been complied with and customs duties, or charges having an equivalent effect, have been levied in the importing country.

Nonetheless, traditional agricultural products are not covered by the arrangements, and will be included in the Customs Union only after Turkey has completed the alignment of its agricultural sector with the EU’s common agricultural policy. On the other hand, some industrial products from the least developed and developing countries (including the Chinese mainland) benefit from the EU’s Generalised System of Preferences (GSP). With the creation of the Customs Union between the EU and Turkey, such products are also covered under Turkey’s GSP regime.

Measures not covered by the Customs Union

Trade-protection measures such as anti-dumping, however, have not been eliminated between the EU and Turkey. Such protective measures have likewise not been eliminated with respect to dumped and subsidised products from third countries. In other words, Turkey has its own anti-dumping actions, which are separate from those of the EU. Turkey used to impose safeguard quotas on certain textile products originating from the Chinese mainland, which were again different and separate from those of the EU, but they were expired by the end of 2008.

Product standards

The Turkish Standards Institution, or TSE, is the product standardisation body of Turkey, responsible for setting product standards and ensuring compliance. Taking electrical and electronic products as an example, while there is a minimum two-year warranty requirement, it is also necessary to obtain technical approval by TSE, and attain the European CE standard certification under the requirements set out by TSE, before the products can be imported and placed onto the Turkish market. As for toys, TSE also imposes a number of safety standards, which in large follow those required by the EU. Therefore, the attainment of CE standards certification can serve as a good reference for fulfilling the TSE requirements.

RoHS and WEEE

To harmonise with the relevant EU directives, the Turkish version of the RoHS directive entered into force in June 2009, while the Turkish version of the WEEE directive was published in the Turkish Official Journal on 22 May 2012 and to be implemented starting from January 2013 onwards.

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Posted: 30 September 2012

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