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Viewing cable 03ANKARA4546, 2003 INVESTMENT CLIMATE STATEMENT FOR TURKEY -

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Reference ID Created Released Classification Origin
03ANKARA4546 2003-07-21 08:22 2011-08-24 01:00 UNCLASSIFIED Embassy Ankara
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 ANKARA 004546 
 
SIPDIS 
 
 
STATE FOR EB/IFD/OIA 
TREASURY FOR OASIA 
DEPT PLEASE PASS USTR 
FAS FOR ITP/THORBURN 
USDOC FOR ITA/MAC/DDEFALCO 
 
 
E.O. 12958: N/A 
TAGS: EINV KTDB EFIN TU
SUBJECT:  2003 INVESTMENT CLIMATE STATEMENT FOR TURKEY - 
PART IV 
 
 
Ref: STATE 128494 
 
 
The following is the last of four cables transmitting the 
2003 Investment Climate Statement for Turkey: 
 
 
14. LABOR 
 
 
The Turkish labor force numbers around 20.2 million persons, 
with nearly 35 percent employed in agriculture.  The 
official unemployment rate was 12.3 percent in the first 
quarter of 2003.  Students are required to complete eight 
years of schooling and to remain in school until they are 15 
years old.   Turkey has an abundance of unskilled and semi- 
skilled labor.  However, there is a shortage of qualified 
workers for highly automated high-tech industries. 
Individual high-tech firms, both local and foreign-owned, 
have generally conducted their own training programs for 
such job categories.  Vocational training schools for some 
commercial and industrial skills exist in Turkey at the high 
school level.  Apprenticeship programs, both formal and 
informal, remain in place, although they are dying out in 
some traditional occupations.  Turkey's labor force has a 
reputation for being hardworking, productive and dependable. 
 
 
Labor-management relations have been generally good in 
recent years.  Employers are obliged by law to negotiate in 
good faith with unions that have been certified as 
bargaining agents.  Strikes are usually of short duration 
and almost always peaceful.  Since 1980 Turkey has faced 
criticism by the International Labor Organization (ILO), 
particularly for shortcomings in enforcement of ILO 
Convention 98 (right to organize and collective bargaining). 
In 2003, Parliament approved  a Job Security Bill, which 
aims to ensure consultation between employers and labor 
groups in some areas while providing employers with greater 
flexibility in laying off staff. 
 
 
The 1995 and 2001 constitutional amendments reduced 
restrictions on the right to strike to a certain degree and 
civil servants (defined broadly as all employees of the 
central government ministries, including teachers) are 
allowed to form trade unions and to engage in limited 
collective negotiations, but are prohibited from striking. 
A recent amendment to Free Zones Law No. 3218 rescinds the 
prohibition against the right to strike in these zones. 
 
 
The GOT and the civil service unions will begin negotiations 
on a new two-year contract. 
 
 
15.  FOREIGN TRADE ZONES/FREE PORTS 
 
 
Since passage of the Turkish law on free zones in 1985, 21 
zones have been established.  The zones are open to a wide 
range of activity, including manufacturing, storage, 
packaging, trading, banking, and insurance.  Foreign 
products enter and leave the free zones without payment of 
any customs or duties.  Income generated in the zones is 
exempt from corporate and individual income taxation and 
from the value-added tax, but firms are required to make 
social security contributions for their employees. 
Additionally, standardization regulations in Turkey do not 
apply to the activities in the free zones, unless the 
products are imported into Turkey.  In contrast to most 
other free zones, sales to the Turkish domestic market are 
allowed. 
Goods and revenues transported from the zones into Turkey 
are subject to all relevant import regulations.  There are 
no restrictions on foreign firms operations in the free 
zones.  Indeed, the operator of one of Turkey's most 
successful free zones located in Izmir is an American firm. 
 
 
16.  FOREIGN DIRECT INVESTMENT STATISTICS 
 
 
According to Turkish Treasury data, as of  November 2002, 
there are 6,311 foreign firms invested and are operating in 
Turkey.  The Turkish government has provided permits for 
foreign capital since 1980 amounting to USD  34.0 billion, 
and aggregate actual inflows reached USD  15.7 billion.  In 
2002, EU countries accounted for  63.6 percent of authorized 
new foreign investment, OECD countries accounted for  90.4 
percent, and Islamic countries for  2.6 percent.  Over the 
past two decades, France (16.6 percent) has been the top 
source of foreign investment, followed by the Netherlands ( 
15.7 percent), Germany (12.7 percent) and the U.S. (11.6 
percent)  (Note: these figures are based on the amount of 
authorized investment, not on actual capital inflows). 
Because of the absence of a bilateral tax treaty until 1998, 
much U.S.-origin capital was invested in Turkey through 
third-country subsidiaries.  By unofficial estimates the 
U.S. may be the largest source of foreign investment in 
Turkey. 
 
 
In 2002, about  58.0 percent of authorized foreign 
investment took place in services,  39.8 percent in 
manufacturing, and about  2.2 percent in mining and 
agriculture combined.  The sub-sectors with the greatest 
amount of authorized foreign investment include banking 
(10.3 percent);; trade ( 11.4 percent); food, beverage and 
tobacco processing ( 11.9 percent); and insurance (7.7 
percent).  Between 1980 and November  2002, 45.0 percent of 
actual capital inflows were invested in services,  52.0 
percent in manufacturing,  2.0 percent in agriculture, and 
1.0 percent in mining.  The  food industry, trade and 
finance sectors received the highest share of increased 
foreign direct investment permits in 2002. 
 
 
FDI Inflow by Years (million USD) 
 
 
Year           Actual    Inflow/GDP      No firms 
                    Inflow                   (Cumulative) 
1980-1988      1,172 
1989             663        0.80           1,525 
1990             684        0.67           1,856 
1991             907        0.69           2,123 
1992             911        0.78           2,330 
1993             746        0.56           2,554 
1994             636        0.64           2,830 
1995             934        0.66           3,163 
1996             914        0.53           3,582 
1997             852        0.54           4,068 
1998             953        0.49           4,533 
1999             813        0.41           4,950 
2000           1,707        0.85           5,328 
2001           3,288        2.21           5,841 
2002(*)          569        0.48           6,311 
 
 
TOTAL          15,749                      6,311 
 
 
Source: General Directorate of Foreign Investment; (*) 
January through November 2002. 
 
 
 
 
FDI Inflow by Source Country (1999-2002/ million USD) 
 
 
Country        Cumulative Value    Share (percent) 
 
 
Italy               1,968               30.9 
Netherlands           962               15.1 
U.S.A.                793               12.4 
United Kingdom        647               10.1 
Germany               514                8.1 
Bahrain               323                5.1 
Japan                 267                4.2 
France                263                4.1 
Switzerland           104                1.6 
Belgium-Luxemburg      25                0.4 
Spain                  23                0.4 
Others                488                7.7 
 
 
Total               6,377              100.0 
 
 
Turkey's External Investment by Country (As of December 
2002) 
 
 
Country           Amount          Share 
                              (USD millions) 
Netherlands         1,868.2       30.9 
United Kingdom        523.1        8.9 
Germany               532.7        8.8 
Luxembourg            245.8        4.1 
Russia                163.7        2.7 
Azerbaijan            741.8       12.3 
Kazakhstan            431.5        7.1 
United States         192.6        3.2 
Romania               122.7        2.0 
Others              1,218.6       20.1 
                          6,040.8       100.0 
 
 
Source: General Directorate of Banking and Foreign Exchange, 
Treasury 
Major foreign investors 
 
 
Turkey's largest foreign investors include Telecom Italia, 
Renault, Toyota, Fiat, Castrol, Enron Power, Citibank, 
Pirelli Tire, Unilever, RJR Nabisco, Philip Morris, United 
Defense, Honda, Hyundai, Bosch, Siemens, DaimlerChrysler, 
Chase Manhattan, AEG, Bridgestone-Firestone, Cargill, 
Novartis, Coca Cola, Colgate-Palmolive, General Electric, 
General Motors-Opel, ITT, Ford Motor Co., Lockheed Martin, 
Gillette, Goodyear, Hilton International, Aventis, 
McDonald's, Nestle, Mobil, Pepsi, Pfizer, Procter and 
Gamble, InterGen, Abbot Laboratories, Aria and Shell. 
Pearson