Regional Focus

Turkey – Country Profile

Published: Jul 2016

A leading emerging market economy, Turkey is positioned in a strategically significant location between the East and West. In addition to a long history of relations with the EU, the country’s economy has shown remarkable performance with steady growth over the last decade. Treasury Today takes a closer look at the business and treasury landscape.

Portrait of Soyer Ersoy, Head of Global Liquidity and Cash Management, HSBC Turkey

Soyer Ersoy

Head of Global Liquidity and Cash Management, HSBC Turkey

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+90 (0) 212 3764467

Key facts

Geography and society
79m (2015 estimate)
Capital city:
Time zone:
Land boundaries:
Greece, Bulgaria, Georgia, Armenia, Azerbaijan, Iran, Iraq, Syria.
Economy and business sector
Turkish lira
Financial capital:
GDP annual growth (2015 annual):
GDP per capita (2015):
Ease of Doing Business rank:
55th (2016)
Index of Economic Freedom:
79th (2016)
Government type:
parliamentary republic
Recep Tayyip Erdoğan
Prime Minister:
Binali Yıldırım
Trading partners
Top import partners (2015):
China, Germany, Russia, US, Italy, France.
Top export destinations (2015):
Germany, UK, Iraq, Italy, US, France.
Country credit rating
  • BB+ (S&P)

During a briefing in the country’s capital at the end of 2015, Turkish Deputy Prime Minister, Mehmet Simsek, reported a rise in that year’s growth forecast to 4% from the earlier 3%. Citing economic “momentum” and domestic political stability, Simsek added that the government expect annual GDP expansion will reach 5% in 2017 and 2018. Fast-forward to May of this year and Standard & Poor’s had revised Turkey’s credit rating to stable from negative. The firm also evidently recognises the Turkish economy’s resilience in the face of global and local threats to the country’s stability.

Making an impression

These recent signals add to an ever-growing list of Turkey’s achievements in recent years. GDP has increased from US$230bn in 2002 to US$799bn in 2014 and in the same given period, GDP per capita rose from US$3,492 to US$10,395. Turkey represents the 16th largest economy in the world and has been expanding its reach; exports totalled US$158bn at the end of 2014.

There is a unique set of factors working in the country’s favour – for example, Istanbul, Turkey’s largest city, is also the largest city in Europe. It is the only city stretching across two continents and over 50 countries from three continents are within a four hour plane journey. But the country doesn’t rest on its laurels; Turkey’s economic performance is recognised as an example for other emerging markets. A recent World Bank report, titled ‘Turkey’s transitions’, explores the country’s transition from lower to higher middle income in order to share learnings with interested developing countries. In terms of what has driven Turkey’s economic progress, the country’s “economic integration into global markets and among advanced and less developed regions in Turkey” was identified by the report.

This development and integration, of course, is also of interest to those who do, or wish to do, business in the country. According to the Central Bank of Turkey, foreign direct investment (FDI) into Turkey reached US$16.5bn in 2015 at a growth rate of 32% from the previous year. In 2015, the country attained the highest ever annual FDI since the global financial crisis with the monthly average exceeding US$1bn.

The country’s currency, the lira, however, could be cause for concern. It is one of the key emerging market currencies that comes under pressure as a result of market events – the Federal Reserve raising interest rates again, for example. No country is without its challenges, though, and the outlook, in general, is very promising. For example, the Investment Support and Promotion Agency noted the country’s attractiveness to foreign investors is likely to increase further with the realisation of a number of reforms, which have been defined in the 64th Action Plan – a government reform with numerous incentives for the private sector to flourish. Support for students and graduates, interest-free loans for entrepreneurs, and rural development incentives, for example.

In a 2014 report prepared in collaboration with the Foreign Economic Relations Board of Turkey (DEİK), Deloitte identified three major opportunities available for foreign investors planning to invest in Turkey:

  1. The stable and continuous growth of the Turkish economy, with the goal of becoming one of the top ten economies in the world by 2023.
  2. Its strategic location with strong historic and cultural links that would afford investors access to the whole Middle East market.
  3. A favourable demographic distribution of the population with a very high ratio of young people.

In fact, the country’s location drives a noteworthy trend, says Soyer Ersoy, Head of Global Liquidity and Cash Management, HSBC Turkey. “Many corporates decide to make Turkey their regional treasury hub to cover the Europe, Middle East and Africa (EMEA) and Middle East and North Africa (MENA) regions.”

Treasury in the country, in general, is strategic, collaborates with the businesses it serves and is using automation and treasury centres of excellence to consolidate and standardise finance and accounting activities, he adds. “Mostly, treasury departments are very mature and centralised, consisting of former bankers and treasurers with experience globally and locally.”

Supporting corporate growth

Against this promising backdrop, all eyes are on the country’s future. For treasurers wishing to operate in Turkey, a strong banking group to support the company’s activities will be a necessity. HSBC has been present in Turkey since 1990 and in February this year, the bank announced its commitment to the Turkish market. HSBC was amongst the banks that weathered a radical macro and financial sector adjustment programme, implemented in the aftermath of the 1999-2001 financial crises in Turkey. The Banking Sector Restructuring Program is largely credited for the turnaround of fortunes for Turkey’s banks. Banking legislation was also adjusted in accordance with the relevant international regulations and the European Union (EU) banking directives.

“Now, the banking sector in Turkey enjoys a leading position in the world with an ever-growing asset size and strong equity structure, protecting it against shocks that may arise from loans or turbulent market conditions. This strong equity structure enabled Turkish banks to weather the storm well during the liquidity crisis in 2008,” says Ersoy.

The Turkish banking industry is highly developed and competitive. There are 47 local, international and participation banks in Turkey, according to The Banks Association of Turkey in May 2016. “International banks bring with them new technologies and risk management techniques, funds for the banks in need, regulations which can reduce the amount of financial capital that may flee the country in times of crisis and continued lending following shocks that could have a negative effect on the local banking sector,” says Ersoy.

In terms of regulation, the sector is well-regulated. All local and international banks are monitored and governed by two primary regulatory authorities: the Banking Regulation and Supervision Agency (BRSA) and the Central Bank of Republic of Turkey (CBRT).

Payment instruments

  • Cash is mainly used for low-value retail and commercial transactions.
  • Credit transfers are used for high value payment transactions. All credit transfers are automated and can be initiated via bank branch, ATM, telephone, mobile or online. Please also note that there are no low value payments in Turkey.
  • Direct debits. Although direct debits are not widely used, they are available.
  • Cheques are mainly used for large-value commercial payments. The use of cheques in Turkey can cause operational issues – although the use is declining.
  • Card payments. The use of card payments has increased rapidly in recent years; there were 57m credit cards and 105.5m debit cards in circulation at the end of 2014.
  • Electronic banking is also available from all of the country’s commercial banks.

From a global liquidity and cash management perspective, internet and mobile banking users increased by 34m in 2014, representing a 300% increase from 2009, according to the Turkish Banking Association. Therefore, there is “much demand for technology to grow and innovation is highly appreciated by corporate banking clients”, says Ersoy.

As banks continue to heavily invest in high-tech and user-friendly solutions, HSBC’s Global Liquidity & Cash Management Team (GL&CM) in Turkey prides itself on innovation. For instance, HSBC launched a Virtual Account solution last year in Turkey that “has been welcomed by the market”, says Ersoy. The solution allows identification of payer information attached to collection to facilitate the reconciliation process and achieve timely management reporting, and can be managed by HSBC or an ERP.

The GL&CM team offers an enriched proposition with a fully aligned cash management, liquidity management and cards proposition to the Turkish market. As a direct member of all local collection and payment systems, HSBC Turkey provides a full range of payments and cash management products and services. The local sales team also provide a consultative approach to support connectivity and SWIFT solutions.

According to Ersoy, the banks’ services are a recognition of the fact that the same online banking tools popular with international corporate clients, such as FX treasury tools and/or efficient customs tax payments online tools, are also very important for local customers in Turkey. “Local or international banks who can provide these tools have considerable shares in these large corporate clients.”

Overcoming hurdles

As with most countries, there are some nuances for treasurers to be aware of. “Turkey can be a complex and challenging market requiring adaptability and persistence,” says Ersoy. When compared to the SEPA countries and US cheque and cash collections, he says, payments practices are somewhat different for corporates in Turkey. Post-dated cheques in the market, for example, are an issue. Cheques are still frequently used in the commercial segment and are a part of daily life. HSBC, as a direct member of the clearing system provides electronic solutions to customers for cheques.

Turkish laws and regulations regarding tax issues within group companies is a key point that treasurers should be aware of, on top of local cash collection practices. There are some regulations around liquidity management, such as notional pooling – a common practice in Europe – that are not allowed in Turkey. “Liquidity management is basically regulated in the context of companies rather than financial institutions in Turkey. Therefore, before entering into any type of liquidity structure, companies will be expected to seek their own tax and legal advice,” says Ersoy.

All eyes ahead

Turkey’s natural position at the crossroads between Europe, the Middle East and Central Asia means the country is a regional logistics base and the transportation sector a source of economic growth and employment. Turkey’s current logistics industry size is estimated to be around US$80-100bn and is forecast to reach US$108-140bn by 2017. In addition to a customs union agreement with the EU (all customs practices are aligned to WTO standards) and ambitious government plans for infrastructure improvements across road, rail, air and sea transport channels, it is perhaps unsurprising that trade plays an important role in Turkey’s economy. According to the Turkish Ministry of Foreign Affairs, the EU is Turkey’s largest economic partner, accounting for around 40% of Turkish trade. It has been an EU accession country since October 2005 and, in accordance with its accession talks, has adapted a number of its policies and procedures in line with EU standards.

There shouldn’t, therefore, be too many shocks for European treasurers. What’s more, there are no exchange control restrictions affecting inward or outward investment, the repatriation of income or capital, the holding of currency accounts or the settlement of current trading transactions. Corporate income tax is 20% (reduced from 30% in 2006) and the dividend withholding tax rate is 15% on distributions of profit to non-resident shareholders and amounts repatriated by a branch to its head office. Dividends distributed by a resident Turkish entity to another resident Turkish entity are exempt from dividend withholding tax.

Since current global market conditions are volatile, treasurers are likely to be (rightly) cautious about exploring new markets. But Turkey is often heralded as a leading emerging market economy. In April this year, Bloomberg reported that Turkey is defying domestic challenges and offers one of the best risk-adjusted returns in emerging markets, second only to Colombia.

And as banks such as HSBC confirm their commitment, access to a “trusted and recommended banking partner, with a broad range of innovative and relevant products and services, and the financial strength and stability to support their business in the future”, says Ersoy, is assured.

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