c hc ah pa tp et r e5r 1 Business Political Environment Outlook SWOT Analysis Strengths Recent structural reforms, especially those aimed at improving transparency and increasing capitalisation within the banking system, should increase private-sector liquidity. Turkey benefits from membership in a customs union with the European Union, which makes it a very attractive platform for export-oriented manufacturers. Monetary policy is now transparent and oriented towards stabilising inflation. A new code of conduct for civil servants is being implemented to increase transparency and reduce instances of corruption. High levels of literacy and foreign language skills. Weaknesses High external debt increases the economy s vulnerability to investment flows. Widespread tax evasion. Procedures for hiring and firing staff are more highly regulated than in developed European states. Opportunities Draft legislation has been prepared to streamline permission and approval procedures for investors. The government has pushed forward new pension and labour code reforms which should lower labour costs for businesses. The commencement of EU accession negotiations increases Turkey s attractiveness for new FDI. Threats Renewed terrorist attacks could prompt capital flight, resulting in a new economic crisis. Turkish businesses will not be immune to worsening credit conditions globally, with borrowing costs expected to rise. www.businessmonitor.com 43
turkey Q3 2009 BMI Business Environment Risk Ratings Turkey s business environment ranking continues to be weighed down by broadly weak infrastructure, institutional development and market orientation component ratings. That said, the government s commitment to EU convergence reforms and infrastructure investment programmes bodes well for the long term. Certainly, the outlook is positive even amid the recession and we expect Turkey s business environment rating to rise through the medium term. Business Environment Rank Trend Estonia 69.5 10 = Slovenia 66.6 12 = Lithuania 65.9 13 = Cyprus 65.3 15 = Latvia 65.2 16 = Czech Republic 63.2 20 = Hungary 60.5 21 = Slovakia 59.8 22 = Croatia 59.5 23 = Poland 57.6 24 = Greece 55.9 26 = Armenia 54.7 27 = Bulgaria 54.5 28 = Georgia 52.8 29 = Romania 52.1 31 = Turkey 52.0 32 = Serbia 50.8 34 = Russia 46.8 35 = Macedonia 45.9 36 = Ukraine 45.8 37 = Kazakhstan 45.7 38 = Azerbaijan 44.7 39 = Albania 43.6 40 = Bosnia-Herzegovina 41.5 41 = Belarus 36.5 42 = Kyrgyzstan 31.6 43 = Tajikistan 29.7 44 = Turkmenistan 26.9 45 = Uzbekistan 25.4 46 = Montenegro - 49 = Regional average 57.3 Global average 50.1 Emerging Markets average 46.6 44 www.businessmonitor.com
business environment Business Environment Outlook Introduction The pro-business Turkish government has been proactively working to move the country toward EU membership. In that vein, it has instigated a number of key institutional reforms that have helped to harmonise the country s business regulatory framework to international standards while also significantly opening the country to foreign investors While problems remain, including corruption at the local level and copyright infringement, we believe that the legal framework established in recent years should go a long way to help to alleviate these issues over the long term. TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS Infrastructure Institutions Market Orientation Overall Albania 57.0 35.4 38.4 43.6 Armenia 43.5 53.4 67.2 54.7 Azerbaijan 47.7 33.2 53.1 44.7 Belarus 58.5 24.8 26.2 36.5 Bosnia and Herzegovina 43.1 42.3 39.1 41.5 Bulgaria 59.7 50.8 53.0 54.5 Croatia 67.3 51.6 59.7 59.5 Cyprus 70.4 73.5 52.1 65.3 Czech Republic 78.3 59.9 51.5 63.2 Estonia 71.0 75.7 61.9 69.5 FYR Macedonia 47.7 43.0 47.1 45.9 Georgia 38.1 47.9 72.5 52.8 Hungary 72.7 66.1 42.9 60.5 Kazakhstan 47.2 39.5 50.3 45.7 Kyrgyz Republic 35.4 30.0 29.5 31.6 Latvia 66.1 65.5 64.0 65.2 Lithuania 65.6 72.3 59.8 65.9 Moldova 52.6 45.1 58.5 52.1 Mongolia 44.5 52.2 56.0 50.9 Poland 66.9 50.2 55.6 57.6 Romania 55.6 45.4 55.3 52.1 Russia 65.7 37.3 37.4 46.8 Serbia 60.7 43.9 47.7 50.8 Slovakia 69.7 64.0 45.6 59.8 Slovenia 77.8 66.9 55.1 66.6 Tajikistan 24.3 31.6 33.2 29.7 Turkey 51.9 51.2 52.9 52.0 Turkmenistan 29.6 22.2 28.8 26.9 Ukraine 56.4 40.2 40.8 45.8 Uzbekistan 31.2 26.0 19.2 25.4 Global ave. 47.7 47.7 48.7 48.0 Region ave. 54.1 47.5 48.2 49.9 Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator. www.businessmonitor.com 45
turkey Q3 2009 Latest Developments Turkish Prime Minister Tayyip Erdogan announced a major stimulus package on June 4 to halt spiralling unemployment. Corporate tax rates would be cut to between 2-10% depending on the region, down from a current national rate of 20%. Erdogan also announced plans for a loan guarantee fund for small and medium-sized enterprises. We are cautious about the effectiveness of these measures, especially as global demand conditions are forecast to remain weak through to 2010. With sales, revenues and profits contracting in 2009, it is unlikely that the tax reduction will do much to bolster corporate positions this year. Moreover, by targeting differential tax rates for varying regions, we are concerned that the programme will only shift investments around the country as opposed to stimulate any new greenfield projects. TABLE: BMI LEGAL FRAMEWORK RATINGS Investor Protection Rule of Law Contract Enforceability Corruption Albania 52.7 31.1 44.6 28.7 Armenia 48.3 41.9 82.0 43.3 Azerbaijan 50.2 24.6 66.6 18.0 Belarus 60.0 13.2 64.7 6.0 Bosnia and Herzegovina 65.3 40.7 39.1 43.3 Bulgaria 22.2 55.1 56.4 66.0 Croatia 46.9 58.1 70.0 60.7 Cyprus na 85.6 na 61.3 Czech Republic 72.7 79.6 56.9 72.7 Estonia 28.5 83.8 80.1 86.0 FYR Macedonia 46.7 48.5 51.8 34.7 Georgia 38.1 35.9 68.1 38.7 Hungary 60.7 80.2 84.6 77.3 Kazakhstan 39.6 26.3 70.1 28.7 Kyrgyz Republic 35.7 11.4 65.2 8.7 Latvia 54.6 70.1 85.4 71.3 Lithuania 37.2 68.3 90.5 72.7 Moldova 23.2 35.3 56.0 51.3 Mongolia 62.5 52.1 62.4 38.7 Poland 42.5 65.3 40.8 63.3 Romania 24.4 55.7 60.2 48.0 Russia 31.7 21.6 74.2 23.3 Serbia 34.4 38.3 49.5 47.3 Slovakia 60.7 67.7 54.6 71.3 Slovenia 72.2 82.0 48.0 84.0 Tajikistan 43.9 14.4 63.7 8.7 Turkey 19.7 61.1 51.4 64.7 Turkmenistan 21.0 5.4 29.0 8.7 Ukraine 60.0 29.9 72.5 38.7 Uzbekistan 48.9 6.0 69.3 6.0 Global ave. 36.7 49.3 49.9 40.7 Region ave. 44.6 44.8 60.8 45.0 Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator. 46 www.businessmonitor.com
business environment The Turkish Ministry of Finance announced on June 3 that it had signed a US$220mn loan deal with the Islamic Development Bank to help build 80 electric locomotives. The loan, which has a 19-year maturity, is part of a long-term government objective to diversify its transport infrastructure and expand rail capacity to facilitate business growth. While a relatively small project, this is a positive development, especially as Turkey s rail network outside the major metropolitan centres remains under-developed. Up to 20,000 people protested against the Turkish government in a demonstration held in Ankara on May 17. The protestors were criticising the perceived anti-secularist policies of the government as well as its handling of the economic recession. Mass protests are fairly common in Turkey s capital, and the vast majority are entirely peaceful in nature, posing very limited security and business environment risks. That said, as the unemployment rate spirals higher in 2009 and the economic recession deepens, we caution that the size and rate of protests are likely to rise. Turkish unemployment hit a record high of 16.1% in the first quarter as firms across most key sectors shed output to cope with collapsing demand. Going forward, we expect the jobless rate to remain elevated though stress that further increases are likely to be limited. Indeed, we hold to our end-2009 forecast of 16.0%. Turkey s Privatisation Administration (OIB) announced on May 8 that it would renew a tender for the sale of the country s lottery by end-2009 after an initial sale attempt on May 7 failed. The OIB had put a US$1.62bn minimum price, well above what any of the potential buyers were looking to bid. The failure of the initial sale is not a positive signal and suggests that the OIB might not be serious about pushing through the privatisation agenda this year. That said, its quick announcement that it would make another attempt to sell the firm within six months is encouraging. Institutions Legal Framework Turkey s judiciary is vigorously independent, with a history of counteracting central government legislation. This does not mean though, that it lacks political proclivities. Indeed, the courts, especially at the higher levels are known for their conservative, secular standpoint and have tended to side with opposition political parties and labour unions against major privatisations and EU and IMF-mandated political and structural economic reforms. In terms of corporate dispute resolution at the lower court levels, the Turkish judiciary generally has the experience and legislative framework to adequately enforce contracts and property rights. That said, an increase in corporate activity over the past five years has not come with a concomitant increase in the capacity of the court system and this does mean that decisions can be slow. While international arbitration is an option, with Turkey a member of the International Centre for the Settlement of Investment Disputes (ICSID), it is not entirely guaranteed that domestic courts will uphold the ruling. There has been at least one case where an international arbitration decision was not upheld by www.businessmonitor.com 47
turkey Q3 2009 Turkish courts and in some cases, the judgements of foreign courts must be first executed by a local equivalent before they are accepted and enforced. With foreign firms not allowed to practice Turkish law, the legal market in Turkey remains dominated by domestic companies. That said, as a requirement for EU membership, the government is moving to open the sector to foreign interests, albeit gradually. As a result, major international firms are increasingly establishing relationships with local firms. It is these partnerships that tend to have the greatest expertise in international corporate law, though they also will charge at the upper end of the US$250-525 an hour average rate for a partner. Property Rights Property rights are well-respected in Turkey, with private firms having the right to purchase, sell and establish full business interests. An established land registry ensures the security of real property rights while the legal system is generally well-experienced with upholding contractual agreements and ownership rights. Expropriation can occur, though the government in recent years has withheld this to only when deemed necessary for public works or major industrial projects. Property owners subject to expropriation can challenge the government-offered purchase price through the court system. Nationalisation is not seen as a major risk in Turkey. Intellectual Property Rights To help stem a perennial problem over copyright violations, Turkey has signed several international protocols regarding the protection of intellectual property rights (IPR) and, in line with membership in the World Trade Organization (WTO), has signed the key Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Moreover, domestic law concerning intellectual property is now among the strictest in Europe, acting as a deterrent for copyright infringement. Pirated media is banned from sale on the street and law enforcement agents have the authority to pre-emptively act against copyright infringement without an original complaint from the rights holder. That said, problems over trademark violations and patent infringement persist and as a result, the country continues to be placed on the US government s Special 301 priority watch list for insufficient protection of IPR. Corruption Turkey ranks 58 of 183 countries in the 2008 Transparency International Corruption Perceptions Index, tied with Poland and Lithuania and ahead of new EU members Bulgaria (70) and Romania (72). In recent years, the government has worked to strengthen the country s anti-corruption framework, reinforcing existing legislation while improving the capacity of state agencies charged with addressing the issue. In 2003, the government signed the OECD convention on Combating Bribery of Public Officials and in 2006 ratified the UN Convention Against Corruption. The criminal code has been brought into line with international standards, even exceeding the US Foreign Corrupt Practices Act in the duration of penalties in some cases. Moreover, a new Corruption Investigations Committee, under the authority of the Prime Ministry has been established to investigate 48 www.businessmonitor.com
business environment high profile corruption cases. Corruption mainly remains a problem at the local level, with bribery cases reported for government procurement projects in particular. That said, we stress that while malfeasance is a concern for foreign investors, it is by no means a significant risk. Indeed, we maintain that the outlook for the corruption situation in Turkey is positive, and that new public procurement reforms designed to make the process more transparent, should help to mitigate the likelihood of bribery solicitations going forward. Infrastructure Physical Infrastructure Turkey s physical infrastructure varies substantially from the relatively well-developed western industrial region and the sparsely populated agrarian east. Indeed, the transport network between the three largest cities of Istanbul, Izmir and Ankara is very efficient, with modern motorways and high capacity railways easing the flow of goods and people. A long-established and advanced port system, centred at the port of Izmir also facilitates significant goods trade flows. In general, Turkey s international connections have long been well-served. Not only has there been an international rail connection between Turkey and Europe for decades, but this is now complemented by ultra-modern airports at Ankara and Istanbul. Both cities are served by new passenger terminals constructed in 2001 and 2006, respectively. Notably, Ataturk International Airport in Istanbul acts as a regional hub, with non-stop services to all major European destinations and most central Asian, Caucasus and middle-eastern destinations. Beyond Istanbul, Izmir and Ankara though, the transport network is less amenable. The quality of the road network deteriorates and the level of rail transport is insufficient beyond these cities. Indeed, despite the size of the country, Turkey currently only has 8,697km of railway. That said, the government is working to invest billions of lira into improving infrastructure throughout the country over the long term. Part of this plan involves direct budgetary injections from the central government, though it is also anchored by a major privatisation initiative, which should see the government sell off ownership of major highways, bridges and ports. It is important to note that the government plans call for a substantial investment even in the remote south-eastern region of the country. On March 12, Prime Minister Tayyip Erdogan pledged to spend US$12bn over a five-year period to build two large dams, a system of water canals and pave a large road network in the provinces along the Syrian and Iraqi border. Indeed, we expect Turkey s electricity, transport, telecommunications, housing and energy transit infrastructure to undergo a significant transformation over our five-year forecast period, as the country s economy accelerates toward EU convergence. Our core view is that foreign investments into infrastructure will continue to be liberalised along with regulatory reforms and the privatisation drive, government capital expenditures will be bolstered by rising revenues and the development of Turkey as an energy transit corridor between the Caucasus and Europe will continue to provide the impetus for new infrastructure projects. www.businessmonitor.com 49
turkey Q3 2009 Labour Force Turkey benefits from one of the largest and youngest labour pools in Europe, with a population of just over 70mn, two-thirds of which are between the ages of 15 and 64. While basic education in Turkey is generally satisfactory, reflected in the 87.4% literacy rate, technical education lags, especially relative to the former communist emerging Europe countries. Indeed, while the country has a boon of low-skilled labour, there is a shortage of highly skilled labour. This has prompted many firms operating in the country to rely on in-house training programs. Owing to the country s established tourism industry, foreign language skills are prevalent, especially in the larger metropolitan centres along the western coast. Labour relations tend to be good, though short duration isolated strikes have been known to occur. Mass action is uncommon, though a two-hour strike including doctors, civil servants and industrial workers did take place on March 14 to protest against proposed changes to the social security system. TABLE: LABOUR FORCE QUALITY Literacy (%) Ave. schooling, years Post-Secondary Completion, % Albania 98.7 na na Armenia 99.4 na na Azerbaijan 98.8 na na Belarus 99.7 na na Bosnia and Herzegovina 96.7 na na Bulgaria 98.6 9.47 12.4 Croatia 98.1 6.28 5.8 Cyprus 96.8 9.15 9.8 Czech Republic 100 9.48 6.8 Estonia 99.8 8.97 8.2 FYR Macedonia 96.1 na na Georgia na na na Hungary 99.3 9.12 10 Kazakhstan 99.5 8.87 4.6 Kyrgyz Republic 98.7 na na Latvia 99.7 9.45 8 Lithuania 99.6 9.42 6.4 Moldova 99.1 9.23 5.8 Mongolia 97.8 na na Poland 93.8 9.84 6.2 Romania 97.3 9.51 4.8 Russia 99.4 10.03 11.5 Serbia 96.4 na na Slovakia 99.7 9.27 7 Slovenia 99.7 7.11 8.5 Tajikistan 99.5 9.79 4.7 Turkey 87.4 5.29 3 Turkmenistan 98.8 na na Ukraine 99.4 na na Uzbekistan 99.3 na na Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator. 50 www.businessmonitor.com
business environment Market Orientation Foreign Investment Policy The Justice and Development party government has made major strides to open the economy to foreign investors since it was first elected in 2001. In keeping with its position that foreign direct investment will be a major driver of Turkey s EU convergence objectives, the government has lowered corporate taxes, lifted regulatory impediments and implemented a major privatisation initiative. Currently, most of the Turkish private sector is open to foreign investors and national treatment is generally accorded to foreign firms operating in the country. There are ownership restrictions in certain key industries though, including 25% for broadcasting and 49% for aviation and maritime transportation. Government permission is also required for foreign ownership in the banking, insurance and petroleum industries. Table: Europe, FDI Annual Inflows 2006 2007 US$bn Per capita US$bn Per capita Armenia 0.45 150.5 0.66 220.3 Azerbaijan -0.60-71.5-4.82-568.7 Belarus 0.354 36.3 1.772 183.0 Bosnia-Herzegovina 0.71 183.7 2.02 524.4 Bulgaria 7.51 978.7 8.43 1106.2 Croatia 3.42 760.8 4.93 1093.5 Cyprus 1.50 1,931.4 2.08 2630.4 Czech Republic 6.01 585.7 9.12 883.8 Estonia 1.67 1,244.9 2.48 1848.9 Georgia 1.06 239.3 1.66 357.1 Greece 5.36 482.2 1.92 171.8 Hungary 6.79 675.0 5.57 555.4 Kazakhstan 6.22 406.5 10.26 667.4 Kyrgyzstan 0.18 34.6 0.21 39.5 Latvia 1.66 705.1 2.17 928.6 Lithuania 1.84 542.1 1.93 573.3 Macedonia 0.42 207.8 0.32 156.9 Moldova 0.242 63.2 0.459 121.1 Montenegro 0.618 1030.0 0.876 1431.4 Poland 19.20 503.5 17.58 462.0 Romania 11.37 527.9 9.77 455.9 Russia 32.39 226.1 52.48 368.2 Serbia 4.50 456.3 3.11 315.4 Slovakia 4.17 772.7 3.27 603.5 Slovenia 0.65 320.9 1.43 702.5 Tajikistan 0.34 51.1 0.40 59.5 Turkey 19.9 270.4 22.03 312.1 Turkmenistan 0.73 143.2 0.80 155.0 Ukraine 5.60 120.1 9.89 213.3 Uzbekistan 0.20 7.4 0.26 9.7 Source: UNCTAD, BMI. www.businessmonitor.com 51
turkey Q3 2009 Going forward, we expect the environment for foreign investment to continue to improve over the long term as the government moves to further integrate the economy with that of the EU. In 2006, the Prime Ministry created the Investment Promotion Agency, which is designed to ease the establishment of new foreign investment projects and promote the reform agenda within government. We caution though, that while the government remains favourable to FDI, there are risks from the judiciary, which has acted to stall reform legislation in the past. Indeed, in 2008 the Constitutional Court struck down a law that would have liberalised the sale of real estate to foreign firms. While we believe the law will eventually be amended to meet constitutional requirements, this incident highlights the ongoing risks the judiciary poses to improvements in foreign investment policy. TABLE: BMI TRADE RATINGS Protectionism Bureaucracy Albania 40.1 33.7 Armenia 78.2 46.8 Azerbaijan 51.0 14.5 Belarus 38.1 45.5 Bosnia and Herzegovina 61.2 64.5 Bulgaria 31.3 45.5 Croatia 97.3 52.0 Cyprus 79.6 na Czech Republic 79.6 65.8 Estonia 79.6 89.4 FYR Macedonia 70.1 31.8 Georgia 35.4 55.6 Hungary 79.6 53.5 Kazakhstan 42.2 3.5 Kyrgyz Republic 62.6 3.5 Latvia 79.6 79.7 Lithuania 79.6 68.1 Moldova 75.5 46.0 Mongolia 58.5 16.9 Poland 79.6 62.6 Romania 72.1 86.2 Russia 38.8 37.3 Serbia 42.2 74.6 Slovakia 79.6 51.7 Slovenia 79.6 41.7 Tajikistan 46.9 18.8 Turkey 78.9 36.9 Turkmenistan 74.1 2.3 Ukraine 65.3 39.2 Uzbekistan 53.1 8.1 Global ave. 47.3 45.4 Region ave. 64.3 43.2 Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator. 52 www.businessmonitor.com
business environment Foreign Trade Regime Turkey became an associate member of the European Community in 1964, which it was able to shift to a full customs union agreement with the EU in 1995. While our core view is that Turkey will not become a full member of the EU until 2015-2020, for the time being, it still benefits substantially from full and open trade access to the EU market in most sectors. It should be noted though, that economic areas deemed as essential, including agriculture, are still covered by separate bilateral agreements. Turkey is also a member of the Euro-Mediterranean partnership, which consists of EU members and 12 states in the wider Mediterranean region. While the partnership has yet to push forward on any trade agreements of substance, there are hopes that it will translate into a wider free trade zone at some point in the future. Turkey maintains 21 free zones where there are no customs duties and any income generated is not subject to income or value added taxes. The zones generally do not target any individual industrial sector, with a wide range of economic activities ranging from banking, manufacturing and transport services taking place. Sales to the domestic market are allowed from the zones, while government standardisation regulations are not required for products designed solely for export. It should be noted that tax free status for income generated from the sale of goods manufactured in the zones is stipulated to be removed once the country becomes a member of the EU. As this is unlikely to happen for quite a while though, this should not be considered an immediate risk. Tax Regime The Turkish government has proactively worked to reduce and simplify the tax structure in recent years. Beginning in 2006, corporate income tax has been levied at a flat 20%, while capital gains are treated as income. Personal income tax is determined progressively, ranging from 15-35%, with the highest rate imposed on those with annual income greater than TRY44,701. There are three value-added tax rates an 18% standard rate and two lower rates of 8% and 1%. The lower 8% rate applies to basic foods, some entertainment services, books, private education and medical services. The 1% rate is applied to agriculture products, used cars, newspapers and some property. Goods exports and the supply of services are among the zero-rated items. Notably, Turkey has signed tax treaties with 61 countries at the time of print, all of which include provisions for the avoidance of double taxation. TABLE: TOP EXPORT DESTINATIONS 2000 2001 2002 2003 2004 2005 2006 2007 GERMANY 5,180 5,367 5,869 7,485 8743.3 9,455 9,684 11,994 UNITED KINGDOM 2,037 2,175 3,025 3,670 5540.4 5,917 6,813 8,626 ITALY 1,789 2,342 2,376 3,193 4624.91 5,617 6,752 7,479 FRANCE 1,657 1,895 2,135 2,826 3668.85 3,806 4,604 5,975 RUSSIA 644 924 1,172 1,368 1858.53 2,377 3,238 4,727 Total exports 27,769 31,323 36,045 47,233 62,989 73,451 85,492 107,113 Top 5, % of total 40.7 40.6 40.4 39.3 38.8 37.0 36.4 36.2 Source: IMF. N.B. Total exports are from Direction of Trade Statistics; consequently, there may be some discrepancy with data used elsewhere in this report. www.businessmonitor.com 53
turkey Q3 2009 Operational Risk Security Risk Divisions between the majority ethnic-turkish and minority ethnic-kurds have been a long standing political problem, which continues to translate into acts of violence both against military and civilian targets. Indeed, the separatist ethnic-kurdish Kurdistan Worker s Party (PKK), officially labelled a terrorist group by the EU and US, has been involved in a low-level guerrilla war against the Turkish government for decades, with the vast majority of the fighting taking place in the south-eastern part of the country and across the Iraq border. Instability in the region has flared up toward the end of 2007 and into 2008, with cross border military raids by both the PKK and Turkish army becoming commonplace. Travel within the region at present comes with elevated personal security risks with the military declaring parts of the provinces of Sirnak, Hakkari and Slirt sensitive areas. While the vast majority of the conflict with Kurdish separatist guerrillas takes place in the remote south-east, acts of terrorism by the PKK have been known to occur within the major industrial centres in the western part of the country. On at least two occasions since 2007, police have reported capturing PKK terrorists in possession of explosives in Istanbul, while PKK attacks on civilian buses in Istanbul and the resort town of Kusadasi in 2005-2006 resulted in the deaths of 11 people, including foreigners. Turkey has also been a target for international terrorist groups. In November 2003, al-qaeda took responsibility for a spate of bombings that targeted the UK consulate general, HSBC s corporate offices and synagogues in Istanbul resulting in the deaths of dozens of people. With the risks of global terror activity likely to remain elevated with the continuation of the conflicts in Iraq and Afghanistan, we caution that further acts of violence could take place in Turkey without any warning. 54 www.businessmonitor.com