Overview of Turkey

Turkey's population is approximately 75 million. Turkey is projected to continue to constitute one of the largest populations in the Middle East and Eastern Europe. The domestic market is predominantly urban, with at least 17 major cities having a population in excess of 1 million, led by Istanbul, Ankara and Izmir. The population is much younger than European countries, with over 60% of the population below the age of 35. The improving consumption patterns and purchasing power, with a growing middle class, are important features of the domestic market. The average annual GDP growth rate of 4.6 % over the 1995-2000 period, well above many other countries, implies a continuing robust growth potential. With Turkey’s population growth rate having fallen from over 2% to roughly 1.5%, it is on the verge of entering a ‘golden demographic period’ similar to what East Asia experienced in the 1980s, where the productive working population is largest relative to children and retirees, providing the potential for even more rapid income growth.

Only a few emerging markets in the world have the potential of attracting investment both for export as well as for their domestic market. Turkey is in such a privileged position to create a ‘virtuous investment cycle’, with a more competitive domestic business environment further strengthening Turkey as a platform for exports, and exports in turn stimulating firms to upgrade and better serve the domestic market.

EU Customs Union and Accession Partnership

In 1996, a Customs Union between the European Union and Turkey came into effect, thereby creating the closest economic and political relationship between the EU and any non-member country. Essentially the Customs Union gives Turkey improved access to the group of countries previously known as the Common Market. It guarantees the free circulation of industrial goods and processed agricultural products. Customs duties and charges have been abolished and non-tariff barriers are prohibited. The Customs Union involves harmonization of Turkey's commercial and competition policies including intellectual property laws with those of the European Union and it extends most of the EU's trade and competition rules to the Turkish economy. The chief characteristic of the Customs Union is that goods move freely between the EU and Turkey without being subject to customs duties or quantitative restrictions; it covers all aspects of trade and commercial policy to ensure there is a "level playing field" for Turkish and European firms.

The Helsinki European Council in 1999 launched Turkey’s formal EU accession process based on the same criteria as applied to all other candidate States. This has allowed Turkey to benefit from a pre-accession strategy to stimulate and support its increasing economic and political harmonization to EU standards. EU financial support for the continuing reforms contained in Turkey’s National Program for the Adoption of the Acquis has been formalized in a 2001 Accession Partnership.

In late December 2004 the EU offered to begin membership talks with Turkey starting on October 3, 2005. EU leaders said the aim of the talks - which could take up to 15 years - would be full membership. As part of the agreement, Turkey agreed to extend an existing trade accord to the newest 10 E.U. members, which include Cyprus.

Turkey is a leading party to the Black Sea Economic Co-operation (BSEC) Agreement, together with other regional countries. The BSEC Agreement highlights the need for adoption of a regional strategy for sustainable development – its objective is a free trade zone between the member states.

Established in 1992, the BSEC is composed of 11 countries: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine. Austria, Egypt, Israel, Italy, Poland, the Slovak Republic and Tunisia have been granted observer status. In 2001, BSEC countries had more than 5 percent of total world trade. More than 5 percent of the world’s population lives in BSEC countries and the total BSEC area is around 20 million square kilometers. These figures indicate the importance of BSEC in the global economic order. It is expected that the significance of the BSEC region in economic and political terms will grow considerably over the coming years due to its geostrategic location, size and command over natural resources – particularly natural gas, oil and coal.

Openness to Global Trade and Investment

In addition to trade agreements with the EU and Black Sea countries, Turkey maintains an extremely liberal trade and investment regime with all countries, in conformity with its membership of international institutions such as the WTO, MIGA and OECD. Turkey has signed additional Free Trade Agreements with EFTA, Hungary, Israel, Romania, Lithuania, Estonia, Czech Republic, Latvia, Slovakia, Slovenia, Bulgaria, Poland, Macedonia, Croatia and Bosnia-Herzegovina. Additional FTAs are being prepared with Albania, Morocco, Tunisia, Egypt, Palestine, Pakistan, South Africa, Mexico and Lebanon. Turkey has signed Bilateral Agreements on the Promotion and Protection of Investments with 67 countries, and is in negotiations with 9 additional countries. These agreements do not bring any new burdens to the concerned countries while providing additional economic and legal assurances to investors.