Turkey: A Guide To Doing Business In Turkiye: ‘Removing Obstacles to Growth & Creating Jobs’ Part III

Turkiye ratified the amendment to the UN-ECE Conventions on Temporary Admission of Private Road Vehicles and Border Controls on Goods in February 2004. The World Customs Organization (‘WCO’) Istanbul Convention was ratified by Parliament in March 2004. Furthermore, in April 2004, Parliament ratified the agreement between the EU and Turkiye on ‘Precursors and Chemicals Frequently Used in Illegal Production of Narcotics and Psychotropic Substances’, which was signed in February 2003.

In May 2004, the Turkish Council of Ministers adopted a decree extending the Customs Union provisions to the new Member States except the Greek Cypriot Authority ("GKRY"). On 2 October, Turkiye published a new decree adding the Greek Cypriot Authority to the list of countries to which the Customs Union provisions apply.

A protocol was signed on the exchange of trade statistics between the Customs Administration and the State Institute of Statistics in February 2004. A cooperation protocol on combating smuggling was signed with the Gendarmerie. The implementing legislation for the Anti-Smuggling Law was published in November 2003. This legislation provides for clearer customs enforcement principles and procedures.

Agreements on mutual administrative assistance in customs matters were concluded with Belgium, Azerbaijan, Moldova and Syria. The Turkish Customs Authority has signed a Memorandum of Understanding on "Advance Exchange of Data Project" with Bulgarian Customs which allows for data-sharing at joint border crossing points.

In the area of Standardization, the Turkish Standards Institute ("TSE") has continued to adopt CENCENELEC and European Telecommunication Standardization Institute (‘ETSI’) standards. With the transposition of additional New Approach Directives and other harmonized EU acquis, the number of mandatory standards decreased from 1,150 to less than 500. The Ministry of Health published guidelines for the appointment of conformity assessment bodies in the areas of medical devices, in-vitro diagnostic and active implantable medical devices.

The Ministry of Industry and Trade adopted a regulation governing the principles and procedures of market surveillance in May 2003.

The Regulation defines the principles of inspection and sanctions to be imposed and the duties and responsibilities of the inspectors. As regards Public Procurement, the Turkish Public Procurement Law was amended in April 2004. The thresholds and financial limits have been revised and raised above EU levels on the basis of the wholesale price index for 2003.

The EU citizens of one Member State have the right to work in another Member State. Turkish migrant workers must be treated in the same way as national workers in relation to working conditions, social, and tax advantages in the EU.

The EU acquis also includes a mechanism to coordinate national social security provisions for insured persons and their family members moving to another EU Member State.

Concerning the free movement of workers in Turkiye, two implementing regulations on ‘work permits for foreign citizens’ were adopted in September 2003 and April 2004. Efforts to modernize the Public Employment Services are underway. Related Turkish staff is being training in view of a possible future inclusion in the European Employment Services (‘EURES’) network.

EU Member States must ensure that the right of establishment of EU national and legal persons in any Member State and that the freedom to provide cross-border services is not hampered by national legislation, subject to the exceptions set out in the EU Treaty.

EU Legislation also harmonizes the rules concerning regulated professions to ensure the mutual recognition of qualifications and diplomas between EU Member States.

Turkiye abolished the Law on Crafts and Services Reserved for Turkish Citizens and adopted the Law on Work Permits of Foreigners, which introduces a more liberal approach.

The Ministry of Labor and Social Security is the responsible body for foreigners’ work permits. However, restrictions still exist in sectoral legislation which limits the right of establishment for foreigners. Sectoral legislation generally requires economic operators to obtain a license or authorization, which necessitates mandatory membership in a Chamber of Commerce, Trade Association or other Professional organization. Certain professions remain closed to foreign nationals.

Mutual recognition of professional qualifications requires more efforts concerning transposition of relevant directives and administrative capacity of both Turkiye and the EU Member States.

The EU Member States must remove, with some exceptions, all restrictions on the movement of capital both within the EU and Third Countries. The EU legislation includes rules concerning cross-border payments and the execution of transfer orders related to securities.

The EC Directive on the fight against Money Laundering and Terrorist Financing requires banks and other financial operators, particularly when dealing in high-value items and with large cash transactions, to identify customers and to report certain transactions.

The key requirements to combat financial crime are the creation of:

• effective administrative, and

• enforcement capacity, including co-operation between supervisory, law enforcement and prosecutorial authorities.

In the field of Capital Movements and Payments, sectoral legislation continues to remove substantial limitations on foreign ownership, particularly as regards civil aviation, maritime transport, radio and television broadcasting, telecommunications, mining, and energy.

The Constitutional Court annulled provisions, establishing the reciprocity principle for foreigners’ real estate purchase, which was introduced in 2003, on the basis of possible threats to National Integrity and the Indivisible Unity of the Turkish State. This provision has been in force since July 2005, as new regulation has not yet been adopted. Land Registration Offices have been instructed to wait for the new regulation and to suspend foreigners’ real estate purchase requests.

With regard to institutional investors, the Insurance Law and the implemented legislation on investment in foreign assets do not contain any de jure restrictions. However, these assets may still not be used to constitute compulsory reserves.

The main public authority responsible for New Foreign Direct Investment (‘FDI’) matters is the General Directorate of Foreign Investment within the Undersecretariat of the Treasury.

The government’s anti-corruption policies played a big role in the financial crisis that erupted in February 2001. Since then, Turkiye has ratified major International and European Conventions. In the field of Money Laundering, Turkiye ratified the Council of Europe Criminal Law Convention on Corruption in January 2004, which provides for the criminalisation of the laundering of proceeds deriving from corruption offences.

Turkiye joined the Group of States against Corruption ("GRECO"), which monitors compliance with European anti-corruption standards. Furthermore, it examines in detail the areas of banking, customs, energy, construction, tender proceedings, transportation, national defence, local administration, health, social security, privatisation, agriculture, tourism, associations, universities and the activities of certain Ministries such as the Ministry of Justice and the Ministry of the Interior.

A new Banking Law was adopted in October 2005 which enhances prudential regulations and supervision and widened the scope of predicate offences for money laundering and increased the limitation period for money laundering offences.

Turkiye ratified the Council of Europe Convention "on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime" in September 2004. The number of suspicious transactions reported to the Financial Crimes Investigation Board (‘MASAK’, member of the Financial Intelligence Unit "FIU") was 180 in 2003, compared to 194 in 2002. MASAK carried out 192 preliminary investigations in 2003, compared to 155 in 2002. Prosecutions were brought in 31 cases, compared to 17 cases in 2002. MASAK and the Turkish Union of Bankers ("TBB") published guidelines on the fight against money laundering and terrorist financing for the banking sector.

The scope of Parliamentary Immunity has been identified as one of the problems in the context of corruption in Turkish public life.

Turkiye continues to make further progress in aligning its legislation with the EU acquis and practices in the areas of Justice and Home Affairs. In general, Turkish legislation is aligned to a certain extent with the EU acquis.

The EU legislation relates to the adoption of internationally agreed EU compliant principles, standards and methods of the Public Internal Financial Control (‘PIFC’).

The PIFC applies to the internal control systems of the entire public sector, including the spending of EU funds.

The PIFC also requires:

• the existence of an effective and transparent financial management and control system, including adequate ex-ante, ongoing and ex-post financial control or inspection;
• functionally independent internal audit systems;
• the relevant organizational structures, including co-ordination;
• an operationally and financially independent external audit organization to access; and
• the quality of the newly established PIFC system.

Turkiye progressed with the adoption of the Public Financial Management and Control Law in December 2003. All the provisions of the Law, except those on budget execution, was brought into force in 2005.

The Law authorizes the Turkish Court of Accounts to conduct financial, performance and compliance audits of all public administration in accordance with the International Audit Standards (‘IAS’).

Turkiye still needs to adopt the revised Charter for the Court of Accounts on the basis of the INTOSAI.

Turkiye also progressed in the protection of the EU financial interests with the adoption of the Public Financial Management and Financial Control Law ("PFMFC"). The Framework Agreement on Pre-Accession Assistance between the EU and Turkiye was signed in February 2005 and came into force in May 2005.

Administrative structures to manage Pre-Accession Funds within ex-ante Decentralized Implementation System (‘DIS’) are in place in Turkiye.

The system has been accredited for the management of all types of EU Funds. In addition, contacts with the European Anti-Fraud Office (‘OLAF’) should take place in order to establish a structure specializing in:

• the co-ordination in fight against fraud, and
• co-operation with the anti-fraud service of the EC.

A Bank Recapitalization Act has been passed as a result of pressure from the IMF. This Act, No. 4743 of 30 January 2002, authorizes the Turkish Banking Sector Regulatory Body ("BDDK") to recapitalize certain banks.

The BDDK is an administratively and financially autonomous entity. The decision-making body of the Agency is the Banking Regulation and Supervision Board, which consists of seven (7) members and is appointed by the Council of Ministers, upon the proposal of the responsible Minister. The BDDK is financed by the banks’ contributions, calculated on the basis of the size of their balance sheets.

There are 48 bank in total operating in Turkiye. 18 private, 2 state, 13 foreign and the TMSF bank operate as commercial banks. The banking sector is largely open to foreign operators; however their share in total assets was limited to 3% as of 2004. Turkish State Banks control 35% of total assets, provide 21% of the total loans, and collect 42% of the total deposits.

The program is currently being implemented and should lead to extensive restructuring of the Turkish banking sector (www.bddk.gov.tr).

The BDDK adopted a detailed road map for the BASEL-II capital requirements framework, with a view to start implementation as of January 2008 with the less advanced approaches and as of January 2009 with the more advanced ones.

The BBDK concluded Memoranda of Understandings with the Banking Supervisory Authorities of Albania, Bahrain, Indonesia, Kazakhstan, Pakistan, Romania, Malta, Greece and Kyrgyzstan.

As part of the recapitalization program, the banks are initially subject to a special audit procedure reviewing their financial circumstances and their financial activities (on a consolidated basis).

The usual auditors of each bank conducted an initial "detailed" audit of the accounts as of December 31, 2001, taking into account all of the major events which may have had an impact on the accounts up to March 31, 2002 (the "First Audit"). An independent audit firm then conducted a second audit reviewing the first audit (the "Second Audit").

These first two audit reports are currently being examined by BDDK-certified auditors (the "Third Audit"). On the basis of these audited accounts, the BDDK will examine the Cooke ratio of each bank and any recapitalization measures that may be required.

The banks which have not achieved a ratio of 8% despite the recapitalization measures recommended by the BDDK following the audits (such as incorporation of their available reserves as part of capital) may, between now and June 30, 2003, be eligible to benefit from recapitalization measures with financial assistance from the Saving Deposit Insurance Fund ("TMSF").

Such assistance will be conditional on a resolution of the shareholders of the bank concerned, the preparation of a 3 year business plan and the definition of a restructuring plan. If the BDDK deems the bank eligible, public financial assistance may take the form of:

However, the type of financial assistance will depend on the precise financial position of the bank.

Banks with a ratio of more than 5% but less than the international norm of 8% will benefit from a recapitalization subscribed for by the TMSF to an issue of bonds convertible into equity. Shareholders’ equity should therefore increase to achieve a prudential ratio of 9%, i.e. one percentage point more than the ratio of 8% required by the international authorities.

Banks with a capital adequacy ratio of less than 5% may benefit from a subscription to share capital by the TMSF subject to two conditions that:

In any event, the beneficiaries of financial assistance will be required to offer the equivalent of 60% of the amount of the aid given by the TMSF in the form of loans to the real economy.

The Turkish Banking Act was further amended at the beginning of 2002. One of the most important measures relates to the recapitalization of banks.

As of September, 2005, the Saving Deposit Insurance Fund ("TMSF"), or the TMSF, had taken over 23 private banks since 1997. The Savings and Deposit Insurance Fund will contribute to capital increases for Turkish banks whose capital adequacy ratio is less than 5 %. It will only subscribe for increases in capital if the shareholders of the bank concerned contribute 50% of the requisite amounts themselves. For banks with a higher ratio, the TMSF may subscribe for an issue of bonds convertible into equity maturing in 7 years.

On July 17, 2004, the TBMM passed Law No. 5230, which called for the Merger of Pamukbank with the state-owned bank Halkbank, and the merger was finalized on November 17, 2004.

On July 20, 2004 Cukurova Group reached an agreement with Yapi Kredi, and, on August 4 and 5, 2004 Cukurova Group reached agreements, with the Banking Regulation and Supervision Agency (‘BDDK’), and the TMSF respectively, relating to Cukurova Group's early repayments of its debt to the TMSF and Yapi Kredi Bank.

In accordance with these agreements, Cukurova Group is expected to repay US$2.1 billion to TMSF in 13 months, in installments, and approximately US$2 billion to Yapi Kredi Bank in 20 months, in installments, as opposed to the repayment of US$3.2 billion in 15 years to TMSF and approximately US$2 billion to Yapi Kredi Bank in 9 years under the previous arrangements. Cukurova Group failed to pay the first required installment to Yapi Kredi under its agreement with the Yapi Kredi which was signed in July 2004.

As a result, the agreement between Yapi Kredi and Cukurova Group was annulled and the arrangements were reinstituted. The agreement between TMSF and Cukurova Group, signed in August 2004, remains in effect. The Cukurova shares in Yapı Kredi were acquaried by Koc-Unicredito Consortium and the share purchase agreement was signed on 31 January 2005.

The overall level of alignment in the field of investment services and securities is moderate. Capital adequacy, public disclosure and company prospectus requirements have been brought in line with EU acquis.

The Turkish Derivatives Exchange became operational during 2005. Currently, seven (7) different futures contracts based on commodities, interest rates, currencies, and stock indices are being traded on the derivatives market.

This development constituted an important step for the improvement of the securities markets. New prudential rules were introduced on the purchase of investment instruments by using overdraft facilities.

h. The Capital Market Board (‘SPK’)

The SPK acts as the regulatory and supervisory body for the investment services and securities markets. The SPK is a public entity with administrative and financial autonomy (www.cmb.gov.tr ).

A total of 16 Memoranda of Understanding have been concluded with foreign supervisory authorities to exchange of information and improve supervisory co-operation.

EU acquis consists mainly of directly binding rules which does not require transposition into national law. EU legislation results from the EU’s Multilateral and Bilateral Commercial Commitments, as well as from a number of autonomous preferential trade measures.

In the field of Humanitarian Aid and Development Policy, EU Member States need to comply with the EU acquis, International Commitments and ensure the capacity to participate in the EU’s development and humanitarian policies.

Turkiye’s Commercial Policy is already aligned to a large extent with the EU acquis in the areas covered by the EU-Turkiye Customs Union. Turkish government in August and September 2004, and October 2005, respectively adopted Ministerial decrees aligning the Turkish System of Preferences to the EC Generalized System of Preferences in force until December 2005.

Turkiye needs to align with the New Generalized System of Preferences scheme adopted by the EU Council in June 2005 and which will come into force in January 2006.

In January 2005, Turkiye imposed safeguards measures on textile and apparel products of Chinese origin in 42 categories. These measures imposed, on the basis of relevant WTO rules, differ from those adopted by EU Council in July 2005.

Concerning Bilateral Agreements with Third Countries, Turkiye signed a Free Trade Agreement ("FTA") with Morocco in April 2004. This FTA contains provisions on industrial goods similar to the ones in the EU’s Association Agreement with Morocco.

A FTA signed with;

• the Palestinian Authority in July 2004 and came into force in July 2005,
• Tunisia in November 2004, entered into force in July 2005, and
• Syria in December 2004, was signed.
• Although Turkiye initiated negotiations with Egypt and Jordan, discussions will be completed.
• Moreover, Turkiye proposed to initiate free trade negotiations with Algeria, Mexico and South Africa.

As regards the control of Dual-use Goods, a communiqué setting out an ex-ante permission system for the export of goods that could be used in developing weapons of mass destruction was adopted in December 2003.

Turkiye began to implement the "catch-all" principle in export controls of dual-use goods.

The Company Law includes rules on the formation, registration, merger and division of companies. Regarding Company Law, an amendment to the Turkish Commercial Code (‘TTK’), aimed at simplifying the procedures for setting up a company in parallel with the provisions of the new Foreign Direct Investment Law (‘FDI’) (numbered 4875), has in force since June 17, 2003. The number of steps for establishing a company was reduced from 19 to 3 (www.hazine.gov.tr/realsectorleg.htm ).

Turkish Foreign Investment policy has changed from screening system to monitoring system. With this new scope, Undersecretariat of Treasury will collect any kind of data concerning the foreign investments and determine the foreign investment policy of Turkiye.

FDI Law emphasizes the key elements of the liberal investment environment in Turkiye and is a "legal guide" to international investors about their rights and obligations (www.investinturkey.gov.tr ).

Banks, private finance institutions, insurance companies, financial leasing companies, factoring companies, holding companies, companies operating foreign currency exchange offices, companies dealing with public warehousing, publicly held companies subject to the Capital Markets Law [numbered 2499 dated July 30, 1981, amended by Law 4487 dated December 18, 1999, and revised by Law 4629 (dated March 3, 2001), and by Law 4743 (dated January 31, 2002)], companies that are founders and operators of free zones are still subject to permits from the Ministry of Industry and Trade ( www.sanayi.gov.tr ).

Turkiye has made progress towards the adoption of International Financial Reporting Standards (‘IFRS’), including the International Accounting Standards (‘IAS’).

There are still some differences between the financial position and performance of an enterprise prepared in accordance with the Turkish Uniform Chart of Accounts (‘UCA’) and Tax Procedure Law (‘VUK’), as opposed to the financial position and performance resulting from IFRS.

The Competition acquis covers both Anti-trust and State-aid control policies.

It includes rules and procedures:

• to fight anti-competitive behavior by companies (restrictive agreements between undertakings and abuse of dominant position),
• to scrutinize mergers between undertakings, and
• to prevent government from granting state aid, which distorts competition in the internal market.

a. The Competition Regulatory Authority (‘Rekabet Kurumu’, or "RK"), was founded by an old Competition Protection Act which came into force on December 7, 1994 and was published in the Turkish Official Gazette, numbered Law 4054).

The role of this independent administrative authority is:

This authority, which has been disregarded by Turkish businesses for a long time, has just publicly exerted its powers by imposing heavy fines totaling in excess of €1 million on part of the Turkish cement industry.

The Turkish Competition Board consists of an eleven-member board and has a total staff of 310, responsible for competition investigations, assessment of mergers and acquisitions, exemptions and negative clearance.

Apart from these, there are six examination experts mainly responsible for decisions of the Turkish Competition Board who assist with their reasoning, four lawyers mainly responsible for dealing with cases before the Council of State, and four assistant experts in research.

The Competition Authority is an independent authority but recent governmental efforts to establish a uniform organizational structure for all independent regulatory authorities by adopting framework legislation raise concerns about potential political intervention in the operations of the Competition Authority.

The Competition Authority is the sole body responsible for the enforcement of anti-trust rules. The sector regulatory authorities such as the Energy Market Regulatory Authority, the Telecommunication Authority, the Banking Regulatory and Supervision Authority, ensure efficient co-operation and use of consultation mechanisms with the RK in order to prevent any competition distortions in their respective regulated markets.

The Competition Board adopted a communiqué, which came into effect on April 1, 2005, increasing the administrative fines provided for in the law with respect to the Protection of Competition.

In 2005, the Competition Authority imposed fines in 40 cases out of 110 cases concluded and the amount of fines imposed totaled around EUR26 million. 3 out of 122 merger cases were approved in 2004 and 45 merger cases were handled by the RK in May 2005.

Legislation is still in preparation. The State Aid legislation, or establishment of an operationally independent State Aid Monitoring Authority is an obligation under the Customs Union Decision 1/95 and the 1996 ECSC-Turkiye Free Trade Agreement. This hinders the implementation of State-aid control regime and results in distortions of competition in the markets via allocation of public aid, decreasing the transparency of financial transactions made between the state and its undertakings.

The Turkish Authorities have to ensure a satisfactory level of transparency on state-granted aid, and draw up of the National Steel Restructuring Program supporting the Turkish request for derogation to allow state aid in the steel sector.

For example, although the elimination of input subsidies was one of the objectives of the Agriculture Reform Implementation Project, the Turkish Government announced grant input subsidies for fertilizer and diesel in 2005.

On December 25, 2003, the TBMM passed the new Tax Law which is part of the Government’s medium-term tax strategy to reform the current tax system in a manner consistent with Turkiye’s commitments under the 2002-2004 Stand-By Arrangement.

The new Tax Law (Law No. 5035), was published in the Official Gazette on January 2, 2004. On January 29, 2004, the law implementing the second phase of Turkiye’s tax reform was approved by the TBMM. The law provides for tax and investment incentives in certain regions in Turkiye.

On July 7, 2004, the draft law completing a portion of the final phase of Turkiye’s tax reform was approved by a sub-commission of the TBMM. The law, which provides Tax Incentives and eliminates Double Taxation, will be discussed at the TBMM before its final approval. The final phase of the tax reform will conclude with the approval of a new draft law, which is intended to restructure the Revenue Department.

Companies which possess legal or business headquarters in Turkiye are taxed on their world-wide corporate earnings (full liability).

Companies that do not have legal headquarters or business headquarters in Turkiye are taxed solely on corporate earnings made in Turkiye (limited liability).

Non-tax resident companies with "limited liability" tax status are taxed, among other things, on:

a. Corporation tax : Gains realized on the sale of securities by non-resident corporations to resident corporations or individuals are subject to Turkish corporate tax at a rate of 30%.

Furthermore, pursuant to Article 94/6-b of the Income Tax Code, there is also an income withholding tax of 10% applied to the after-tax gain, resulting in an effective tax burden of 39.7 % for year 2004 and 37 % for the following years.

Pursuant to Article 94/6-b of the Income Tax Code, the dividends distributed to non-resident corporations operating without creating a permanent establishment (fixed place of business or permanent representative) in Turkiye are subject to 10 % withholding tax within the company distributing dividend. However, the provisions of Bilateral Tax Treaties are reserved.

Also, stock dividends are not subject to withholding tax.

KDV applies to:

OTV applies to:

Imports of goods and services are subject to KDV and OTV.

Exports of goods deliveries and services for customers abroad are exempt from KDV and OTV.

Turkiye has introduced a specific duty on cigarettes, differentiated by content of oriental tobacco.

Regarding excise duty, discriminatory features should be eliminated from acquis and alignment should be ensured on the level of rates, in particular on cigarettes.

Further to the adoption of the Labor Law in May 2003, several implementing regulations have been issued. The implementing regulations concerning ‘the working time, overtime work and special procedures for shift workers’ have in force since April 2004.

The regulation on ‘occupational health and safety in temporary or fixed-term employment’ was published in May 2004. The regulation on the employment of children and young workers came into force in April 2004. The regulation defines the minimum ages for different types of work, appropriate areas and conditions for work, and responsibilities of the employer and of the State. The regulation on arduous and hazardous work came into force in June 2004. The institutional and administrative capacity of the Child Bureau has been strengthened.

The constitutional amendments adopted by the TBMM in May 2004 introduced the following provision: "Men and women shall have equal rights. The State has the duty to ensure that this equality is put into practice."

Further to the new Labor Law, additional implementing regulations were adopted in July 2004 and August 2004 on working conditions of pregnant and breastfeeding women and on working conditions of women on night shifts, which aim to bring Turkish legislation in line with the Directive on the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding. A new law was issued in July 2004 which entitles civil servants to paid maternity leave of sixteen weeks.

Several regulations have been issued. A regulation aimed at the transposition of the Framework Directive was brought into force in December 2003. Additional regulations referring to minimum health and safety requirements on vibrations, noise, safety and health signs, working with display screen equipment, construction sites, chemical substances, explosive atmospheres, biological agents, carcinogenic and mutagenic substances, asbestos, manual handling, use of personal protective equipment, workplace, mineral extracting industries through drilling, surface mines and quarries, and use of work equipment were adopted in December 2003, February and June 2004.

The majority of these regulations came into force on the day of their publication, except the ones on vibration, noise and asbestos, which will come into force gradually.

The regulation setting out rules and procedures for the functioning of the "Tri-Partite Advisory Board" was brought into force in April 2004. The Board, composed of representatives from the government, trade union confederations, the main employers’ union and the public employees’ union, met for the first time in May 2004.

The Board has the tasks of advising on matters of working life, of fostering cooperation and compromise-seeking among the parties and of monitoring legislative developments in this area. Amendments to the Public Employees’ Trade Union Act were adopted in June 2004 with a view to simplify procedures for membership.

Turkiye has signed the Global Framework Convention on Tobacco Control ("FCTC"). A regulation on the notification of communicable diseases was published in February 2004 and will come into force in January 2005. Turkiye has become a member of the disease notification and information networks of Euvacnet, Dipnet and Hepnet set up by the EU Member States for disease notification and sharing of information.

f. The Fight Against HIV/AIDS

Turkiye continues to be a low-prevalence country and has developed national strategies to prevent its spread. Additional resources were committed to the health sector, with an allocation of 3.2% of the overall 2004 state budget (2.42% in 2003) to the Ministry of Health (www.saglik.gov.tr ).

g. The Employment Policy

Average unemployment in 2004 stood at 10.3% compared with 9.0%, 2003, and 10.3% in 2002. Female unemployment was 7.3% in 2003, whereas male unemployment was 9.5%.

The overall employment rate in 2002 stood at 45.5% and has been declining since 2000.

The female employment rate is particularly low at 25.5%; the male employment rate has fallen from over 70% in 2000 to 65.5% in 2002.

The Turkish Employment Agency ("ISKUR") is continuing its efforts to improve its institutional capacity. Work has started between the European Commission and the Turkish authorities (under the coordination of ISKUR) on the drafting of the Joint Assessment Paper of Employment Policy Priorities.

h. The Social Inclusion

A circular issued in July 2004 obliges public institutions with more than 50 employees to have at least 3% of its staff composed of disabled persons or ex-convicts.

i. The Social Protection

An amendment to the Social Security Act ("SSK") of June 2004 ensures that the minimum premium contribution would always be calculated on the basis of the minimum wage.

An amendment to the law on free health services for the poorest (broadening the scope of such services) was adopted in July 2004.

Turkish Labor Law prohibits the employment of children under the age of 15.

There are still several shortcomings as regards the scope of application of the law.

A new Law on the Protection of Children adopted in July 2005.

This law established for the first time a legal framework aimed at safeguarding the rights and well-being of both children with particular problems and children under legal investigation or who have been convicted of crimes.

The Labor Code (No.1457, dated August 25, 1971) has been repealed and superseded by Labor Code No. 4857 enacted and put into force upon promulgation in the Turkish Official Gazette on June 10, 2003.

The Code sets down and regulates:

An employment agreement is a contract whereby the "worker" being a party of the agreement "agrees to work for the employer", and the "employer" being the other party "agrees to pay a wage or fee" to the worker. Unless otherwise specified in the Code, employment agreements are not subject to a special shape or format.

However, employment agreements valid for one year or more are required to be made in writing. These agreements are exempt from stamp tax and all kinds of taxes, duties and imposts. If no written agreement is made, the employer is under obligation to give the worker a document showing working/employment conditions within two (2) months.

In addition to any employment agreements, the employment relationship will also be governed by the Collective Labor Agreement, executed by and between the employer and the Labor Union of which the employees are members, and the relevant laws and regulations.

A work permit is required unless the individual is a national of the Republic of Turkiye. In addition to a work permit, an individual must obtain:

It usually takes one (to three) month(s) to complete the required procedures and no substantial fees are charged.

In work places where thirty or more employees are employed, the employer, who terminates the open-ended employment contract of an employee having at least six months of experience, is required to have a just cause such as incapacity or attitude of the employee or the requirements of the enterprise, work place or the business. The employer shall notify the employee in writing and the termination notice shall clearly and definitely identify the "cause of termination".

Turk Telecom ("TT") was legally abolished at the end of 2003. It dealt with the national and international voice telephony and the establishment and operation of telecommunication infrastructure.

In principle, therefore, the telecommunication market has been open to new entrants since January 2004 and this has led the Telecommunication Authority into an intensive work program.

Generally, the measures needed to facilitate market entry emerged afterwards and, although much progress has been made, there are still obstacles hindering new entrants.

Implementing acquis was adopted, including that on numbering, co-location and facility-sharing. The regulation on telecommunications services was amended in April 2004.

Other telecommunications licenses granted in 2003 include one for global mobile personal communications by satellite, one for satellite platform services and one for satellite telecommunications services. With the additional ten (10) licenses issued in 2003, there are ninety-six (96) internet service providers on the market.

The total GSM market has reached 27.9 million users. The Bill concerning the merger of the latest two market entrants was approved by Parliament in January 2004. The merger was completed in February 2004. The new company has about 4.5 million subscribers representing 15% of the total market.

In the field of administrative capacity, the human resources situation has been improving due to the training and recruitment of new staff. Currently, the Telecommunications Authority has 454 employees, of which 60 deal directly with regulatory tasks.

EU Legislation on public procurement includes general principles of transparency, equal treatment, fair competition and non-discrimination. In addition, specific EU rules apply to the coordination of the award of public contracts for works, services, and supplies, for traditional contracting entities and special sectors.

In the Turkish Public Procurement Law, a number of derogations have been introduced through five (5) sectoral laws. Accordingly, any acquisition of goods or services which fall under the scope of the new law will be exempt from the provisions of the Public Procurement Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.