Turkey Investment Risk Analysis

Introduction
Today Turkey is preserved as one of the countries that offer a solid ground for foreign investment. According to the Republic of Turkey Prime Ministry Investment Support and Promotion Agency [PMISPA] (2015), the inflow of Foreign Direct Investment [FDI] has reached 12.5 BUSD in 2014 and the amount of countries with foreign capital is constantly growing. While the biggest Turkey’s assets are mainly related to soil and population, a set of political reforms targeted to support the investment, the close possibility to join the EU contribute largely to growing interest of foreign investors. On the other hand, doing business in Turkey requires deeper understanding of local culture, people and their approach to business and life values in general. When making a business decision on whether to invest to Turkey, mainly economic, political and cultural factors shall be taken into consideration.
Strategic location
Turkey with an area of 784 mil km2 (Central Intelligence Agency [CIA], 2013) can boast about its geographical location of high strategic importance. The country is located on the crossroads of 3 continents and has borders with 8 countries, which opens unique business opportunities in Europe, Asia, the Middle East, the North Africa, Russia and CIC. In addition to that, the attractive Turkish coastlines have made Turkey the 6th most popular touristic destination in the world (PMISPA, 2015), which is one of the advantages when investing in Turkey.
Turkish infrastructure constantly develops as well. There are over 110 airports in Turkey, an extensive railway system and a profound shipping system, which enable the flexible and rapid business transactions, as well as easy access for foreign visitors. In order to meet the latest demands for growing economy, the government of Turkey further supports major projects in transport and energy segments. PMISPA (2015) published the announcement of the Turkish government related to the Turkey main targets by 2023 within infrastructure development: * Increasing the length of high-speed railway lines to 10,000 km from 888 km. * Reaching 7,500 km of motorways from 2,236 km in 2013. * Increasing the passenger capacity of airports from 165 million to 400 million. * Reaching a 32 million TEU handling capacity for container transport. * Having a 10 million DWT shipbuilding capacity. * Increasing the number of marinas to 100 with a yacht capacity of 50,000.
The geographical advantages, both touristic and strategic benefits, as well as high governmental aspirations within the infrastructure development make Turkey a lucrative venture for investment.
Developing Economy
Over the last ten years Turkey has experienced a thorough economic transformation and is today based on a solid economic ground. Currently, it is the 17th largest economy in the world, the 6th largest economy in Europe and its GDP has increased within the last 15 years reaching approximately USD 800 billion in 2014 (CIA, 2013). The purchasing power of population is increasing, which leads to higher demands for new products and services. Moreover, the Turkish government has forecasted the further increase of GDP per capita to US$20,000 by 2023 (PMISPA, 2015). All the above mentioned factors contribute positively to establishing good conditions for business opportunities in Turkey.
The Turkish region is rich in resources, which supports the vast development of many industries. The main industries include construction, real estate industry, steel and cement industry, which is today the 7th biggest in the world (CIA, 2013), as well as transportation and energy industries. The demand in the construction industry is highly driven by two factors: the urbanization trend of Turkish population and the flow of the Middle Eastern capital, which sees Turkey and the overall Turkish banking system as a secure spot.
A constantly expanding market based on the manufacturing industries increases potential profitability of business in Turkey and, therefore, makes it more attractive for foreign investors.
Political risks
Political situation in Turkey is not exactly favorable at the moment. The Parliament elections are to come in November and the society is awaiting possible changes in country politics and economics. Friedman (2015) warns that in the today’s Turkish society the human rights, free speech, justice and basic human rights are also under discussion and serious political pressure. Therefore, the current situation can be perceived as a threat for potential investments.
One of the biggest impacts on doing business in Turkey would be possible acquiring the EU membership. If Turkey entered the EU, it would become the biggest EU country and it will only be exceeded by Germany in population. This fact would raise the importance of Turkish market for investments.
Nevertheless, the Turkish government still focuses on guaranteeing the attractiveness of the country for existing and future investments. In order to support foreign investment, the government has ratified the R&D and Innovation Support Law as well as undertaken incentives for strategic investments, large-scale investments and regional investments (PMISPA, 2015).
Turkey is a country not only with diverse and dynamic economy, but also a young growing population. Almost 55 per cent of the whole population are people below the age of 30 (CIA, 2013), which makes Turkish nation the youngest in its region. It influences the increasing demand in many markets, e.g. F&B, textile, technology and services.
According to the latest data provided by PMISPA (2015), the unemployment rate in Turkey is getting almost to 10 per cent. The high amount of the unemployed raises the competitiveness on the labor market and raises the efficiency of the workforce, which might be advantageous for bringing a new business to the country.
Cultural aspects
Besides economic and political factors described above, it is also culture that plays a crucial role in the way business is done in Turkey. A different cultural values and language may appear as big obstacles in doing business in Turkey. Thus, more profound understanding of local habits, rituals, and perception of others would ease the communication and contribute to the business development.
Hofstede (itim International, 2015) describes 6 factors that determine a culture: power distance, individualism, masculinity uncertainty avoidance, long term orientation and indulgence.
According to Hofstede, the business top-down structure in Turkey is highly hierarchical and formal, superiors are often inaccessible and the ideal boss plays the role of a father. Power is centralized and managers heavily rely on their bosses and established rules. In general, employees expect to be told what to do. Information flow is highly selective. So to say, when having negotiations in Turkey, it is important to identify the key decision maker, which would typically be the owner of the company.
On the scale of individualism, Turkey scores 37, being a collectivistic society (itim International, 2015). For Turkish culture “We” is more important than „I“. People belong to inner groups (families or organizations). Open conflicts are avoided. Thus, the negative feedback is to be given rather indirectly. The relationship based on morals always has higher priority over task fulfillment. The Turkish invest time primarily to the establishment of trust. When there is trust, there could be business. According to Lily Sprangers and Meltem Ücer (2009), Turks still put more trust in people rather than contract or bureaucracy. Therefore, to be successful in business, we need to spend more time on network building and relations. It may seem as a risk when establishing a new business. However, once you gained credibility, you acquire new contacts, as well as contacts of their partner network, and their long-term loyalty.
In masculine/feminine dimension Turkey scores 45, which is close to the middle of the scale, yet still stays rather on the Feminine side. In negotiations with others it is common for Turks to seek for consensus. Family is of highest importance in Turkey. Therefore, it is important to avoid open conflicts when doing business with Turks and respect the time spent with families.
The high level of uncertainty avoidance (score 85) shows that in Turkish culture there is a big need for laws and rules. In order to minimize uncertainty, people prefer following a lot of rituals. Turkish people use many references to “Allah” in their speech, which may be seen as a high religious factor. However, often it is nothing but a traditional social custom. Lily Sprangers and Meltem Ücer (2009) also speak about the importance of not losing face in Turkish culture. Turks are generally sensitive to criticism. This fact shall be considered during negotiations or when managing a Turkish team and the negative feedback shall be given in a constructive way, ideally during a face-to-face discussion.
In the matter of long term orientation and indulgence, Turkey scores with 46 and 49 points respectively, being more or less in the middle of the scale. However, in comparison to the Czech, who are, according to Hofstede (itim International, 2015), very pragmatic, adaptable and believe that truth depends very much on the situation, context and time, Turks are less adaptable to changed conditions and will be rather tradition-oriented and following the known old ways. Turks are also more indulgent than Czechs, who are considered rather a restraint culture, with a tendency to cynicism and pessimism. Turks, on the contrary, put more emphasis on leisure time and control the gratification of their desires (itim International, 2015).
Another factor that needs attention is time awareness in Turkish culture, which ranks among cultures with polychromic perception of time (Kwintessential Ltd, 2014). In this culture deadlines are not strict; people tend to take more tasks at the same time, private and work life often overlap. However, today, with a raising competitiveness in various sectors, the need for efficiency increases. Thus, even though state companies in Turkey still follow the original model, privately based companies have adopted the western model, giving more power to deadlines and respect for time (Sprangers, L., & Ücer, M., 2009). One more reason for unpunctuality is caused by traffic problems. Istanbul is the biggest European city and to get from one part to another may take a couple of hours. People are used to it and are more patient to changes in the starting time of appointments.
Even though 99.8 % of Turks are Muslims (CIA, 2013), Turkey differs from other Muslim states. The country has developed with a secularized government and educational system, rather following the modern western trends. Most of women do not wear the veil and Islam is taken as a religion, but not a lifestyle. In private life, Turks are offended when being referred to Arabs due to the fact of sharing the same religion. On the contrary, it would make a good impression if Turkish people feel they are taken as Europeans.
R.D. Lewis (2006) in his publication states that even though personal space in Turkish culture is defined to over a meter, it is common that Turks are usually more tactile among friends (mostly of common sex). Men kiss each other when greeting and common dances are also quite common. This habit differentiates Turks from Europeans and we shall be aware of it when visiting Turkey.
According to Lewis, Turks are also more reactive than any Europeans (with an exception of Finns) and could also be classified as a listening culture, adjusting their own position to fit best the interlocutor. They would also not speak over their interlocutor. In the same way, Turks appreciate when their counterparty expresses interest in their opinions, culture and acceptance. According to Lewis (2006), in order to fit Turkish culture, it is recommended to show sympathy for Turkey's European aspirations, exhibit solidarity as often as possible, show early trust and warmth and socialize with them, respect their religion, even though the state is secular. On the contrary, in discussions we need to avoid topics related to the position of women, political situation over Greece or Cyprus, as well as Kurdish conflicts.
An important point to mention relates to the prices negotiations. “Starting prices bear little relation to the intrinsic value of items. Turkish salespeople who are beaten down, or simply rejected, keep their cool, showing no signs of anger or annoyance. Doors are kept open for future deals.” (R.D. Lewis, 2006). It is important to keep in mind that “bargaining” is common and expected in Turkish culture and often belongs to a day-to-day business.
In other words, by increasing cultural awareness and acquiring cross cultural skills, foreign investors can maximize their prospects when doing business in Turkey.

Conclusion
To summarize, looking at the Turkey, its culture and continuous economic development, we may say that the country is undergoing a somewhat transition process, as it is still largely affected by traditional norms and ways of thinking, yet it is trying to meet the high demands of the modern world. Despite identified political risks related mainly to the current political situation and cultural difference, Turkey still seems to have a strong potential for economic growth and business opportunities, which makes it a good country to invest.

References Central Intelligence Agency. (2013). Turkey. The world factbook. Retrieved November 1, 2013, from https://www.cia.gov/library/publications/the-world-factbook/geos/qa.html
Friedman, J. (2015). What are the opportunities and risks of doing business in Turkey? StrategicRISK. Retrieved October 24, 2015, from http://www.strategic-risk-global.com/what-are-the-opportunities-and-risks-of-doing-business-in
-turkey/1413785.article
Itim International. (2015). Turkey. The Hofstede Centre. Cultural Dimensions. Retrieved October 24, 2015, from http://geert-hofstede.com/turkey.html
Kwintessential Ltd. (2014). Doing Business in Turkey. Retrieved November 1, 2015, from http://www.kwintessential.co.uk/etiquette/doing-business-turkey.html
Lewis, R.D. (2006). When cultures collide: Leading across culture (3rd ed.). Retrieved from CU database.
Sprangers, L., & Ücer, M. (2009). Cultural differences in doing business in Turkey and the Netherlands. Retrieved from Consulate General of the Kingdom of the Netherlands Web site: http://www.hollandturkeytrade.com/images/faqanswers/a6.pdf
The Republic of Turkey Prime Ministry Investment Support and Promotion Agency. (2015). Investment Guide. Retrieved October 22, 2015, from http://www.invest.gov.tr
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