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The subject of this study is to guide to foreign investors who are planning to invest and to do business in Turkey. It should be underlined that this study frames only the general climate of Turkish Investment atmosphere. Therefore, a foreign investor who is really thinking about investing in Turkey should take legal advice in order to consider special conditions that could change case by case. For this purpose, our firm is ready to serve foreign investors who would like to invest in Turkey. Detailed information could be extracted from this link: www.legal-finance.com

The information that stated in this study refers to the actual legal situation in Turkey up to September 2005.

After economic liberalism started to govern the global economy in the 1980’s, privatization became one of the most essential reforms on the economic strategy of Turkey. Since 1984, privatization has taken place in Turkey’s economic agenda.

The object of the privatization in Turkey is minimising state involvement in economic activities and is relieving the financial burden of State Economic Enterprises on the national budget. Privatization also serves to the development of capital markets and the re-channelling of resources towards new investments.

The investment opportunities in Turkey are magnetizing in the framework of country’s ongoing ambitious privatization agenda. Furthermore, the involvement and participation of international investors is highly encouraged in the massive privatization program.

The Legal Framework of the Privatization

The first legal and structural arrangements for privatization in Turkey were made by Law 2983 ( March 1984) and Law 3291 ( May 1986). The actual legal situation is regulated by the Privatization Law No. 4046, dated 1994. The principles, procedures, authorised agencies and other issues regarding privatization are all stated in this Law.
The regulations of the Privatization Law could be summarized as the followings:

* The scope of the assets to be privatized is expanded by this Law.
* The Privatization High Council and the Privatization Administration are established in order to facilitate the decision making process in the privatization endeavour.
* Adequate framework, funds and appropriate mechanisms to speed up the privatization and restructuring processes are determined in this Law.
* A social safety net is ensured for workers who lose their jobs as a result of privatization.

The responsible bodies from privatization under the Privatization Law No.4046 are Privatization High Council and Privatization Administration.
The Privatization High Council is the ultimate decision-making body for privatization in Turkey. The Council, headed by the Prime Minister, is composed of four ministers. The Privatization High Council is competent to nominate the organisations for privatization through taking state-owned economic enterprises in and out of the privatization portfolio and is responsible from the methodology and timing of the privatization procedures by approving the final transfer procedure of the organizations to real people or/and legal entities.
The Privatization Administration is the executive body for the privatization process. It is a legal public entity with an exclusive budget, reporting directly to the Prime Minister. The Privatization Administration executes the decisions of the Privatization High Council and acts as a counsel to the Privatization High Council in matters related to the transfer of State Economic Enterprises into or out of privatization portfolio and restructuring and rehabilitation of State Economic Enterprises in order to prepare them for privatization.
It should be underlined that there are other bodies in charge of privatization. The privatization of Turk Telekom is undertaken by an independent Tender Committee. Also, the Banking Regulation and Supervision Agency is responsible of privatization of State Banks.

Privatization Method

A State Economic Enterprise to be privatized has to firstly take place in the privatization portfolio before the privatization transactions are completely started. There is not only one and specific method to privatize a State Economic Enterprise that is in the privatization portfolio. These followings are the different methods used in the privatization process:

- Sale

- Lease

- Grant of operational rights

- Establishment of Property Rights other than Ownership

- Profit Sharing Model and other Legal Dispositions Depending on the Nature of the Business

Among these methods, sale has a special importance and has much more scope of application than the other methods.
The method of sale expresses the transfer of the ownership of companies in full or partially, or the transfer of shares of these companies through domestic or international public offerings, block sales to real and/or legal entities, block sales including deferred public offerings, sales to employees, sales on the stock exchanges by standard or special orders, sales to investment funds and/or securities investment partnerships by taking into consideration the prevailing conditions of the companies.
Under the Privatization Law No.4046, the Value Assessment Commissions are created to determine the value of assets that to be privatized. The criteria that are being considered for the determination of the value are the industrial, commercial and social features, service distinction, sector and market specifications, potential future cash flows, production methods, technological structure, movables and immovables and quotation of the stocks in the several exchanges.
Under the Privatization Law No.4046, the Tender Commissions are also established. The duty of these commissions is to decide to employ one or more of the tender methods. The methods to be applied are these followings: Sealed bid, negotiation, public auction, sealed bid among designated bidders.

These are the companies that are privatized so far:

* 3 fodder companies of YEMSAN (Block sale through tender offer)
* TELETAS ( Offer to the public)
* USAS ( Block sale with delayed offer to the public)
* 5 cement companies of CITOSAN
* 7 fodder companies (Block sale through tender offer)
* Erdemir ( Offer to the public)
* Kepez Elektrik
* Cukurova
* Arcelik
* Celik halat
* PETKIM ( Offer to the public with delayed block sale)
* 3 cement companies ( Offer to the public)
* Migros
* Ditas
* Petrol Ofisi
* Gima
* TOFAS Manufacturing Co
* TOFAS Trading Co ( Block sale with delayed offer to the public)

The other major companies that take place in the privatization portfolio are these followings:

- Tupras

- Turk Telekom

- TEKEL

- THY

- Milli Piyango Idaresi

- Seker Fabrikalari

- Elektrik Uretim ve Dagitim Tesisleri

The Related Links

Ministries

Ministry of Energy and Natural Resources
www.enerji.gov.tr

Ministry of Finance
www.maliye.gov.tr

Ministry of Foreign Affairs
www.mfa.gov.tr

Prime Ministry
www.basbakanlik.gov.tr

Governmental Bodies

Investor Relations Office
www.hazine.gov.tr/iro.htm

Office of the First Economic Counsellor
www.turkisheconomy.org

Public Procurement Authority
www.ppa.gov.tr

Republic of Turkey Prime Ministry Privatization Administration
www.oib.gov.tr

Republic of Turkey Prime Ministry Undersecretariat of Customs
www.gumruk.gov.tr

Small and Medium Industry Development Organization
www.kosgeb.gov.tr

State Institute of Statistics
www.die.gov.tr

State Planning Organization
www.dpt.gov.tr

The Central Bank of Turkey
www.tcbm.gov.tr

Turkey Cooperation and Development Administration
www.tika.gov.tr

Undersecretariat of the Prime Ministry for Treasury
www.treasury.gov.tr

Independent Administrative Bodies

Banking Regulation and Supervision Agency
www.bddk.org.tr

Capital Markets of Board of Turkey
www.cmb.gov.tr

Energy Market Regulatory Authority
www.epdk.org.tr

Savings Deposit Insurance Fund
www.tmsf.org.tr

The Scientific and Technological Research Council of Turkey
www.tubitak.gov.tr

Turkish Competition Authority
www.rekabet.gov.tr

Unions and Organizations

Economic Development Foundation
www.ikv.org.tr

Foreign Economic Relations Board
www.deik.org.tr

Foreign Investors’ Association
www.yased.org.tr