Doing Business in Turkey in its eighth edition

Update with more in-depth insight into the Turkish business environment

Norton Rose Fulbright and Pekin Bayar Mizrahi are pleased to announce the 2023 update of the Legal Handbook for Doing Business in Turkey.

Along with information about the general legal framework in Turkey, Doing Business in Turkey 2023 seeks to aid businesses in understanding the Turkish market, introduces key regulatory aspects of trending sectors and provides key information about the investment climate in the country.

Key updates in this edition

In this edition, a new sector highlight on healthcare is added, in addition to the other sector highlights on mining, infrastructure, privatization, crypto assets, and energy. The energy sector highlight also includes new sub-sections on renewable energy and energy transition.

Doing Business in Turkey 2023 also has updated chapters on corporate environment, protection of foreign investments, banking and finance, environmental law, labor law, anticorruption, ESG and features updates on the regulatory framework on:

• Green finance and sustainable finance
• Environmental law
• Renewable energy

Since the last edition of this guide, a number of new regulations have been issued addressing environmental concerns and ESG matters, such as the new ESG principles applicable to listed companies, the new Environmental Impact Assessment Regulation, the new Regulation on Environmental Management Services, the new Regulation on Contaminant Emission and Transfer Register, and the new Regulation on Environmental Noise Control.

The enactment by the Competition Board of the reconciliation mechanism as an alternative to competition investigations, Istanbul Arbitration Center's new agreements with other international arbitration centers, introduction of the regulation on "persons with public influence" for fighting against money laundering, amendments to real estate lease legislation and amendments to tax ratios are some of the other major changes included in this new edition as we believe these developments need to be considered while making business decisions going forward.

Key Themes and Trends in Turkey in 2023

Turkey ranks as having the 19th highest GDP in the world according to the World Bank data and has a free-market economy with a combination of traditional agriculture, modern industry and a dynamic services sector. Often viewed by investors as having a large, skilled and cost-effective workforce, the OECD ranks Turkey as the seventh largest labor pool in the world and the third largest labor pool among the European countries. Agriculture, industry and services are all key components of the Turkish economy.

Manufacturing is driven by strong sectors such as automotive, textile and consumer goods. The services industry is driven by the financial services, telecommunications, tourism and healthcare sectors. In particular, real estate assets have been a strong target of foreign investment. Turkey's growing economy and the increasing demand for energy, which cannot be met by currently available domestic energy resources, has resulted in a dependency on energy imports and recent activity in renewable energy investments.

The following trends are expected to continue shaping the Turkish business ecosystem in 2023:

Digital transformation and investments

Promulgation of the Law on Payment Systems is accepted to be an important step in the development of the FinTech sector in Turkey, including pre-paid cards, digital wallets, invoice and accounting, budget management, offline payments, money transfers, loyalty cards, bill collection, cash collection, cash registers, point-of-sale devices and credit scoring. Coupled with expectations for new licensing regulations in the crypto currency market and continuing growth of e-commerce platforms, an increased activity is expected in the Turkish FinTech sector.

The gaming industry also continues its growth with the active works of development studios, publishers and mobile game platforms receiving traffic from both local and overseas users.

Growth in banking

Banking sector in Turkey is growing in turnover as well as profitability but the banks need to deal with a wide range of developments such as IBOR transition, net zero targets and ESG considerations that require special expertise. An increased number of Turkish banks are also securing sustainability loans to extend to Turkish businesses.

Financial restructuring

Financial restructuring is increasing due to fluctuations in the global economy and the increasing inflation in Turkey. Financial restructurings are expected to occur in most of Turkey's leading sectors such as infrastructure, construction, mining and energy.

Environmental, social and governance (ESG)

Along with the rest of the world, Turkish stakeholders began to embrace the importance of ESG topics as a way to monitor and control their responsibility towards the domestic and global community. A new understanding is emerging in Turkey of how long-term success, including financial performance, depends on the integration of sustainability and ESG matters into key business decision-making and operation processes.

Sustainable finance products have become popular and an incremental growth in terms of deals is expected. In addition, EU's "Carbon Border Adjustment Mechanism" creates adaptability necessities for Turkish companies doing business with European countries. There is also an ongoing interest from foreign investors in key renewable energy assets in Turkey to diversify their portfolios.

Energy transition

Parallel to the developments in the world, energy transition is becoming more important in Turkey every day. In addition to increasing the total installed capacity of renewable energy plants, integrating new resources, such as green hydrogen, in the Turkish energy mix and promoting the rapid integration of new energy-efficient and greener technologies became a hot topic in Turkey. In 2022, the Ministry of Energy has completed three Renewable Energy Resource Area tenders for solar and wind power and a new cohort is being planned in 2023.

These ambitions not only require access to new financing resources but also necessitate the enabling legislation to be put in place. A new regulation about renewable energy facilities was followed by a new legislation about electrical vehicle charging stations. The legislative efforts coupled with a large-scale battery factory investment in Turkey for electrical vehicles, indicate the increasing importance of energy transition in transportation.

Public offerings

There is a marked increase in IPO activity in Turkey. Some of this activity is related to growth in the e-commerce and retail sectors while other is related to meeting longer term capital needs.

Increasing importance of data privacy and data protection

Domestic and international businesses active in Turkey face increasingly complex challenges associated with the management of local as well as international data protection risks. Governmental enforcement of all types of regulation has increased the need for Turkish-regulation related compliance work. The increase in cross-border collaboration between regulators also means incidents in one jurisdiction often have consequences in other regions.

Changing trends in healthcare services

In addition to further infrastructure investments and digitalization efforts, i.e. the rolling out of the e-Pulse platform as well as the issuance of the Regulation on the Provision of Distant Health Services, on the public side, medical and health tourism is on the rise and new regulations target to set out international standards for foreign patients.

For more information, read the full legal handbook, Doing Business in Turkey 2023.