Restrictions on Overseas Trade in Turkey - Term Paper Example

RESTRICTIONS ON OVERSEAS TRADE IN TURKEY A republic in south Eastern Europe and Asia Minor, Turkey occupiesa strategic position, linking as it does Asia and Europe at the Straits of Bosphorus and Dardanelles, between the Mediterranean Sea and the Black sea. Turkey is bordered by eight countries, namely Greece to the west, Bulgaria to the northwest, Iran ,Armenia and the Nakhichevan exclave of Azerbaijan to the east, Georgia to the northeast, and Iraq and Syria to the southeast. In addition, it borders the Black Sea to the north, Mediterranean Sea to the south and the Aegean Sea to the west. Turkey also posses the Sea of Marmara, that has a great importance to geographers in marking the border between Europe and Asia. All these geographical factors make the country transcontinental. Turkey being a natural bridge between the old continents of Asia, Africa and Europe, has a vast scope of overseas trading. But still the government of Turkey plonk restrictions on overseas trade. (Fletcher, 2006) Trade Barriers and reasons behind the barriers and restrictions in turkey. The investment climate of Turkey, that forms barriers for any outsider, whether large or small, domestic or foreign, cause problems that affect all economic sectors of the country, particularly the telecommunication sector. The major problems which agitate Turkey's economy are shortage of well functioning capital market, limited expertise in banking system and technologically oriented companies, partial regulatory process that always intend to restrain new companies and buoy up existing companies, specially those belonging to prominent business families of the country. Companies in Turkey both the private enterprises and public enterprises specially, suffer from corruption in various levels of the organizational hierarchy. The judicial system of the country, up to some extent, can be suspected to be influenced by external political and commercial mal forces. Growing personal and political relationship between government officials and business representatives form the basis of corruption, which appears to be the most serious problem biting up the economy of the country. Barriers in investment of the private sectors and the foreign companies in the markets in Turkey is also a matter of concern. The Bilateral Investment Treaty (BIT) between Turkey and United States of America came into force in May 1990. Due to liberal investment regime of turkey, foreign investors are provided with national treatment in the country. In Turkey companies possessing foreign capital are treated as local companies. Regardless of nationality, private sector investments are always hindered by the facts like political and economical uncertainty, lack of judicial stability, and unwarranted bureaucracy, and high tax rate, unpredictable changes in legal and regulatory environment, fragile framework for corporate governance etc. All areas except finance and petroleum sectors are fully open to foreign participation. Though the petroleum and financial areas are open to the private sectors and foreign investors in Turkey, Special permission is required for the foreign companies to establish business in these sectors. (Lamb, 2006) Foreign share holders have restricted equity participation ratio, such as near about twenty percent in Broadcasting industry, forty nine percent in aviation, marine transportation and value added telecommunication services industries. Sometimes arbitrary legislative action under cut the rationale for the investments of the foreign companies committed to the Turkish market. International settlement of investment disputes between foreign investors and the state remain bonded by efforts of the government of turkey, following the inscriptions mentioned in the Bilateral Investment Treaty (BIT) signed by both the concerned parties. For several years the government of Turkey was providing concessions in public services, to the private investors and specially the foreign investors. According to the amendment package passed in the Turkish parliament in the year 1999, the foreign companies investing in Turkish markets were endorsed to access to zero. By taking this step the government of Turkey proceeded in implementing legislation for arbitration. The Turkish parliament approved a law in the year 2001, further escalating the opportunity of international arbitration in the agreements of the state. A legislation passed by the parliament of Turkey in the year 2003 streamlined the lengthy processes of launch of a company in Turkey. This law also eliminated vetting of foreign investors in approval of a notification procedure, in acquisition of real estate foreign owned entities are not differentiated from the local investors. The government also brought to an end to minimum capital requests for foreign investors. By the law passed by the Turkish government In the year 2001, fully liberalized energy market will be provided, in which with the approval of a regulatory body, private companies can develop projects. But later no concern was given in this matter and very little progress has been made in privatizing the fields mentioned in the law, such as the power generation sector and the distribution sector. (Lock, 2006) Turkey is the thirty first largest export markets for goods produced by United States. Foreign Direct Investment (FDI) of United States in Turkey in the year 2002 was $1.9 billion. Foreign Direct Investment (FDI) of United States mainly concentrated in whole sale manufacturing and banking sectors. Tariff policies of Turkey form quantities restrictions in its import policies. In the year 1996 Turkey go united with the European Union (EU). This makes the country free to apply the external customs of tariff and export as directed by the European Union (EU). Turkey does not impose duty on non agricultural products from American Free Trade Association (EFTA) and European Union (EU) countries. In the year 2003 the government of Turkey reduced the average tariff for industrial products imported from European Union (EU) countries. This has greatly benefited third country exporters. In order to protect domestic producers Turkish government has maintained a relatively high rate of tariff, near about twenty percent on money, agricultural and food products, for foreign companies. Highest tariffs are charged on products like alcoholic beverages and animal products. In Turkey Tariffs periodically increased during domestic harvest and also during accumulation of high stock. High tariffs on animal products and high prices of fodder have had a negative affect on livestock industries, especially in beef and poultry farms in Turkey. High duties as well as other domestic charges are levied on alcoholic beverages that add to the whole sale prices. (Lamb, 2007) Generally import licenses are not needed to import products liker industrial products etc. In import of those goods which are required to pay after sales services, such as photocopiers, diesel generators and other process equipments, licenses are needed. In addition to these, several other problems are created due to non tariff barriers, such as demurrage charges, expensive impediments and other uncertainties that smother trade for many agricultural products. The opaque policies of import of the Turkish government has constantly been a matter of complain among the private traders. Due to improper communication between Ankara and the regional offices many inappropriate implementations of policies are caused. The government of turkey is redesigning its import rules for agricultural products so as to abide by the European Union regulations. Ministry of Agriculture and Rural affairs (MARA), for the past four years, by means of its quarantine service provided for no requirement of import licence, for the import of rice products before the domestic harvest of rice. As a result of this Turkey bunged up issuing of licences and still did not lift it's proscribe. Because of the need for issuing certificates and permits from the regulatory bodies like Ministry of Agriculture and Rural affairs (MARA) and TEKEL (a parastatal company), the process importing alcoholic beverages has become very complicated in Turkey. According to the recent legislation the private companies are provided with more authority to control import of alcoholic beverages in the country. Operations of the company TEKEL, has also been privatized. In spite of all changes in trade policies of Turkey, problems like requirement of onerous documents, high duties on sale and purchase, non tariff barriers etc carry on to limiting dealings in alcoholic beverages. In a law passed by the Turkish parliament, provisions are maid to liberate markets of products like sprits and tobacco, over a five year period. This approach can improve the competitive environment of the country. It has been complained by the foreign companies that Turkey put into operation prejudiced price controls for imported pharmaceuticals. In accordance with the trade norms passed in the month of February in the year 2004, Turkish government permits relatively higher prices to be quoted for domestic produced generic drugs. (King, 2006) Today there are several macro-level issues which Turkey has to deal with. First to access and define and then acquire an appropriate role for turkey in relations to the various regional groupings, in a manner which will sub serve interests of the country. International trends generated by some countries to control and to extent possible, deny access to sophisticated technologies in the sphere of space exploration and satellite development and other civilian end-uses. To establish a pattern of and equation with countries in the region as well as those which are father distant, which would ensure a safe secure environment for the country. To adjust to emerging new global regimes affecting international trade, Tran's border movement of technologies and those related to environment. To ensure projection of Turkey's economic potential and capacity in a manner, where the necessary external contributions to Turkey's economy would continue, safeguarding the socio-economic well being of the people and improvement in their quality of life. (Fletcher, 2006) There exist some issues of more immediate concern, on which attention has to be focused in terms of Turkey's foreign policy. The pressures mounted on Turkey by some countries on human rights issues. Turkey suffers from the encouragement of centrifugal tendencies in the country by external entities and their agencies. Turkey has to put forward efforts in stabilizing its relations with its other neighbours despite inevitable problems affecting relation between countries in geographical proximity and also managing the persistently adversarial relationship with the countries against it. Turkey has to deal with multilateral issues on which international attention is focussed, like establishment of new international trading arrangements. Telecommunication industry in Turkey Turk telkom, the telecommunication company administrated by the government of Turkey provides value added services, voice telephony and all basic telecommunication services. In the negotiations held in the World Trade Organization (WTO) on the issue of basic telecommunication services, Turkey agreed to provide market access and national treatment for all services by the end of the year 2005. Value added telecommunication services were also licensed to the private sector with a forty nine percent limit on foreign equity investment. National treatment war provided for paging, mobile and other private networks. In 1/1/2004 a law was passed by the government of turkey, unilaterally accelerating the opening of local markets for telecommunication services. (Fletcher, 2006) By the law passed in the year 2001 by the Turkish government, the areas under the monopoly of Turk Telkom Company had been liberalized with the start share in that company falls below fifty percent implement regulations have not been issued by the government of Turkey. These Levis provide for the creation of an independent regulatory body, The Telecommunication Regulatory Board, and also maid the licensing criteria public. But still complains arise from the United States side that telecommunication companies lack transparency in the processes like licensing and revenue sharing. (Dos, 2006) In order to avoid or overcome or minimize trade barriers in Turkey, the companies can reinforce the Telecommunications Authority board and staffs the board. A powerful organization should be given greater respect and trustworthiness, and will be less likely to have its pronouncements pleaded. Precise steps to bring about this would be the selection of individuals with more experience in the industry and with a compromising attitude to adjust the norms of staff salary caps. In order to survive in Turkey's market foreign companies can obey the norms set by the Turkish government. Foreign companies can seek help of the global bodies like European Union (EU), World Trade Organization (WTO) etc to counter the restrictive and differential polices of The Turkish government. The example should be taken of Telsim Vodafone ehich being a foreign company, instead of all barriers succeeded in becoming Turkey's second largest mobile phone operator, having about 11 million active subscribers and a twenty fine percent share of the market in the country. (Lamb, 2006) Turkey's foreign policy has to meet the external ramifications of many serious and volatile events, while, at the same time addressing the problems and issues generated by external events, emmerging inter-state equations of important countries and their attitude towards issues affecting Turkey's basic concerns and interests. Thus it can be concluded that the conduct of Turkey's foreign relations is characterized by flexibility, a clear perception of its national interests and a measured, down to earth, approach in meeting these interests. References: Dos, M; 2006; The Future of Macroeconomics; Alliance Publications. Fletcher, R; 2006; Beliefs and Knowledge: Believing and Knowing; Howard & Price. King, H; 2006; International Economics Today; HBT & Brooks Ltd. Lamb, Davis; 2006; Cult to Culture: The Development of Civilization on the Strategic Strata; National Book Trust. Lamb, Susan; 2007; The Justifications of Aggressive Trading System; Curtley-Vosges. Lock, D; 2006; Perspective and Perceptions of International Trade; Howard & Price. Read More