BRIEFING ON FOREIGN DIRECT INVESTMENT AND INVESTMENT CLIMATE REFORM January 2009 BERRİN BİNGÖL DIRECTOR GENERAL FOR FOREIGN INVESTMENT Republic of Turkey Prime Ministry Undersecretariat of Treasury

WHO WE ARE ? WHO WE ARE ? FOREIGN DIRECT INVESTMENT REGIME IN TURKEY FOREIGN DIRECT INVESTMENT REGIME IN TURKEY INVESTMENT CLIMATE REFORM INVESTMENT CLIMATE REFORM Coordination Council for the Improvement of Investment Climate (YOIKK) Coordination Council for the Improvement of Investment Climate (YOIKK) Investment Advisory Council (IAC) Investment Advisory Council (IAC) FOREIGN DIRECT INVESTMENT FIGURES FOREIGN DIRECT INVESTMENT FIGURES INTERNATIONAL RELATIONS INTERNATIONAL RELATIONS Bilateral Investment Treaties Bilateral Investment Treaties Relations with Multinational Organisations Relations with Multinational Organisations Negotiations with the EU Negotiations with the EU INVESTMENT INCENTIVE ACTIVITIES INVESTMENT INCENTIVE ACTIVITIES OUTLINE

WHO WE ARE ? Working under the Undersecretariat of Treasury; General Directorate of Foreign Investment Working under the Undersecretariat of Treasury; General Directorate of Foreign Investment Draws the main lines of the FDI Policy in coordination with related Government institutions and NGOs, Draws the main lines of the FDI Policy in coordination with related Government institutions and NGOs, Advises on investment incentives, processing applications and issuing incentive certificates for foreign investment companies, Advises on investment incentives, processing applications and issuing incentive certificates for foreign investment companies, Functions as the Coordinator and Secretariat of the Coordination Council for the Improvement of Investment Climate (YOIKK) as well as Investment Advisory Council (IAC), Functions as the Coordinator and Secretariat of the Coordination Council for the Improvement of Investment Climate (YOIKK) as well as Investment Advisory Council (IAC), Compiles data on FDI inflows to Turkey, Compiles data on FDI inflows to Turkey, Coordinates B.O.T issues, Coordinates B.O.T issues, Negotiates Bilateral Investment Treaties, Negotiates Bilateral Investment Treaties, Maintain international relations on FDI related issues, Maintain international relations on FDI related issues, is the National Contact Point for OECD’s Guidelines for Multinational Enterprises. is the National Contact Point for OECD’s Guidelines for Multinational Enterprises.

FOREIGN DIRECT INVESTMENT REGIME Main Principles of Foreign Direct Investment Regime in Turkey Main Principles of Foreign Direct Investment Regime in Turkey No Pre-entry Screening Requirement No Pre-entry Screening Requirement No Minimum Capital Requirement No Minimum Capital Requirement National Treatment National Treatment Guarantee to Transfer Proceeds Guarantee to Transfer Proceeds Key Expatriate Personnel Employment Key Expatriate Personnel Employment Protection Against Expropriation Protection Against Expropriation Access to International Dispute Settlement Access to International Dispute Settlement

Coordination Council for the Improvement of Investment Environment (YOIKK) Steering Committee Investment Advisory Council REFORM ON INVESTMENT ENVIRONMENT & STRUCTURE INVESTMENT CLIMATE REFORM Location of InvestmentForeign Trade & Customs Licencing Taxes & Incentives Company Establishment EmploymentIntellectual Property Rights Foreign Direct Investment Legislation Research & Development Corporate GovernanceInvestment PromotionSMEs

A scheduled YOIKK Action Plan was prepared and announced to the public on February 5 th, The Action Plan was reviewed in March 2008; and January A scheduled YOIKK Action Plan was prepared and announced to the public on February 5 th, The Action Plan was reviewed in March 2008; and January The Action Plan specifies various actions with different activity levels (projects, studies and research on regulation/implementation). Each action was assigned to one of 12 Technical Committees. The Action Plan specifies various actions with different activity levels (projects, studies and research on regulation/implementation). Each action was assigned to one of 12 Technical Committees. To monitor and evaluate the progress of the Action Plan, YOIKK Steering Committee meets periodically. To monitor and evaluate the progress of the Action Plan, YOIKK Steering Committee meets periodically. Coordination Council for the Improvement of Investment Climate (YOIKK) - Action Plan INVESTMENT CLIMATE REFORM

Chaired by the Prime Minister; Participants include: Minister of Finance, and Minister of State in charge of Treasury, Minister of Finance, and Minister of State in charge of Treasury, Executives of leading multinational companies, Executives of leading multinational companies, Heads of the IMF, World Bank, European Investment Bank Heads of the IMF, World Bank, European Investment Bank The Union of Chambers and Commodity Exchanges of Turkey (TOBB), the Turkish Industrialists’ and Businessmen’s Association (TUSIAD), International Investors Association (YASED), Turkish Exporters’ Association (TIM). The Union of Chambers and Commodity Exchanges of Turkey (TOBB), the Turkish Industrialists’ and Businessmen’s Association (TUSIAD), International Investors Association (YASED), Turkish Exporters’ Association (TIM). INVESTMENT ADVISORY COUNCIL INVESTMENT CLIMATE REFORM

INVESTMENT ADVISORY COUNCIL

V. MEETING: 18 JUNE 2008, RECOMMENDATIONS: Enhance dialogue between industry and universities, Accelerate energy sector reforms, including automatic cost recovery pricing, diversification, deregulation and privatization Move forward with labor market reforms that further enhance flexibility while protecting workers Improve infrastructure, transportation and information/communication technology Strengthen the implementation of legislation on intellectual property rights Improve public administration practices Strengthen measures to reduce informal economy Enact the new commercial code to improve corporate governance and accounting standards INVESTMENT CLIMATE REFORM

FOREIGN DIRECT INVESTMENT FIGURES Inflows USD Billion Source: CBRT, ,1

UNCTAD World Investment Report 2008 Published in September Published in September Turkey ranked 23rd in the world, and 9th among the developing countries in terms of annual volume of FDI inflow in Turkey ranked 23rd in the world, and 9th among the developing countries in terms of annual volume of FDI inflow in Relaxed regulatory frameworks, improved business climate and robust economic growth were stated as the reasons behind the success of Turkey in attracting important amounts of international direct investment. Relaxed regulatory frameworks, improved business climate and robust economic growth were stated as the reasons behind the success of Turkey in attracting important amounts of international direct investment. FOREIGN DIRECT INVESTMENT FIGURES

Top Five Home Countries in 2007 Top Five Home Countries in 2008 (As of November) Ordering is based on equity capital inflow. INTERNATIONAL DIRECT INVESTMENT FIGURES Source: CBRT, 2008

Shares of Home Country Groups in Inflows INTERNATIONAL DIRECT INVESTMENT FIGURES January-November 2007

Source: Turkish Treasury, 2008 Number of Companies with International Capital (Cumulative) FOREIGN DIRECT INVESTMENT

Top Five Home Countries in 2007 Top Five Home Countries in 2008 (As of November) Ordering is based on number of companies. INTERNATIONAL DIRECT INVESTMENT FIGURES Source: Turkish Treasury, 2008

Shares of Home Country Groups in Number of Companies INTERNATIONAL DIRECT INVESTMENT FIGURES January-November 2007

FOREIGN DIRECT INVESTMENT Outflows USD Billion Source: CBRT, 2008

INTERNATIONAL RELATIONS FAIR AND EQUITABLE TREATMENT OF FOREIGN DIRECT INVESTMENTS FAIR AND EQUITABLE TREATMENT OF FOREIGN DIRECT INVESTMENTS MOST FAVORED NATION AND NATIONAL TREATMENT FOR FOREIGN DIRECT INVESTMENTS MOST FAVORED NATION AND NATIONAL TREATMENT FOR FOREIGN DIRECT INVESTMENTS PROTECTION AGAINST EXPROPRIATION PROTECTION AGAINST EXPROPRIATION COMPENSATION FOR LOSSES COMPENSATION FOR LOSSES GUARANTEE FOR TRANSFER OF RETURNS & PROFITS GUARANTEE FOR TRANSFER OF RETURNS & PROFITS ACCESS FOR FOREIGN INVESTORS TO INTERNATIONAL ARBITRATION ACCESS FOR FOREIGN INVESTORS TO INTERNATIONAL ARBITRATION ( ICSID & Ad Hoc Arbitration) ( ICSID & Ad Hoc Arbitration) BILATERAL INVESTMENT TREATIES: MAIN PRINCIPLES

TURKEY’S WEB OF BITs INTERNATIONAL RELATIONS Signed and entered into force. Signed, not entered into force yet.

INTERNATIONAL RELATIONS NUMBER OF BILATERAL INVESTMENT TREATIES:

INTERNATIONAL RELATIONS RELATIONS WITH MULTILATERAL ORGANIZATIONS Undersecretariat of Treasury actively joins the activities of Multinational Organizations in the field of Foreign Direct Investment: Undersecretariat of Treasury actively joins the activities of Multinational Organizations in the field of Foreign Direct Investment: Donor in the OECD-MENA Program; Donor in the OECD-MENA Program; Active participant of the OECD Committes on FDI related issues: Active participant of the OECD Committes on FDI related issues: –OECD Investment Committee; –OECD Working Group on International Investment Statistics; –OECD Working Party on Globalization of Industry; National Contact Point for the OECD Guidelines for Multinational Enterprises. National Contact Point for the OECD Guidelines for Multinational Enterprises.

INTERNATIONAL RELATIONS RELATIONS WITH MULTILATERAL ORGANIZATIONS Active participant of UNCTAD Conferences & Seminars on International Investment Agreements; Active participant of UNCTAD Conferences & Seminars on International Investment Agreements; Participant of the Economic Cooperation Organization (ECO) activities in the field of Foreign Direct Investments; Participant of the Economic Cooperation Organization (ECO) activities in the field of Foreign Direct Investments; Participant of the Standing Committee for Economic and Commercial Cooperation (COMCEC) activities among Organization of Islamic Countries (OIC). Participant of the Standing Committee for Economic and Commercial Cooperation (COMCEC) activities among Organization of Islamic Countries (OIC).

 NEGOTIATIONS WITH THE EU: Chapters Involved Free Movement of WorkersFree Movement of Workers Right of Establishment and Freedom To Provide ServicesRight of Establishment and Freedom To Provide Services Free Movement of CapitalFree Movement of Capital Company LawCompany Law Competition PolicyCompetition Policy EnergyEnergy StatisticsStatistics Entreprise and Industry PoliciesEntreprise and Industry Policies External RelationsExternal Relations INTERNATIONAL RELATIONS

INVESTMENT INCENTIVE ACTIVITIES The Undersecretariat of Treasury (UT); General Directorate of Foreign Investment is responsible for processing Investment Incentive applications made by foreign capital companies and their branches. The Undersecretariat of Treasury (UT); General Directorate of Foreign Investment is responsible for processing Investment Incentive applications made by foreign capital companies and their branches. In this context, Departments organized on sectorial basis within the GDFI; In this context, Departments organized on sectorial basis within the GDFI; informs investors; informs investors; issue investment incentive certificates; and issue investment incentive certificates; and finalize related procedures in this regard. finalize related procedures in this regard.

THANK YOU FOR YOUR ATTENTION... BERRIN BİNGÖL DIRECTOR GENERAL FOR FOREIGN INVESTMENT Republic of Turkey Prime Ministry Undersecretariat of Treasury