Starting a small business is desirable for many reasons, such as the independence in being your own employer and the financial rewards involved. Nevertheless, it is not a risk-free endeavour, and those who create startups are often weighed down by the costs involved. That’s why a fair amount end up looking overseas to try and find a cheaper way of setting up their new business, with many choosing Turkey.
Foreign direct investment (FDI) into Turkey has maintained a steady and reliable rate of growth, and has been seen as a secure option due to reduced labour costs and regional advantages that the country has. The government has also incentivised the flow of international capital into Turkey through tax exemptions and favourable interest rates for FDI, among other incentives. For example, by participating in the country’s citizenship by investment scheme, applicants can even receive Turkish citizenship by creating fifty jobs in the country, as CS Global explains.
If all this sounds like an exciting opportunity for your dream of a startup abroad, read on to find out even more about the benefits of launching a business in Turkey.
1. Low start-up costs
Turkey is a much cheaper nation to start a business in compared to countries like the UK or US, largely because starting salaries are less expensive. One reason for this is the small number of graduates who start businesses fresh out of university. This keeps the price of labour down for new businesses owing to the high level of competition for graduate-level jobs. Supply chain costs are also relatively low compared to the rest of the world, without compromising on the quality of goods and services.
Legally speaking, there is also little discrimination between foreign and local businesspeople and investors. In Turkish law, a private limited company (PLC) can be created and operated by two or more non-nationals. Though these businesses require at least one shareholder, at a cost of 10,000 turkish lira (£516) — in the UK the price for foreigners to start a PLC is at least £12,500 — , it is often worthwhile.
2. The number of government incentives
In Turkey, local and foreign direct investment is highly encouraged by the government. The current administration has lowered investor-related costs in order to foster a more friendly environment for investors at home and from abroad. According to the government website, these schemes “help to minimise the upfront cost burden and accelerate the returns on investments”.
The support program is exemplified by the investment incentives system, which includes tax relief, exemption and beneficial interest rates. Foreign investors who acquire an IIC (Investment Incentive Certificate) are granted a support package that includes customs duty and VAT exemption, corporate tax reduction, land allocation and social security premiums.
The most recent available data from the government department’s official website has shown the positive effect of these policies. Indeed, FDI in the country has flourished despite the global slowdown of economic activity during the pandemic: “within its peer countries in emerging Europe, Turkey was ranked as the 2nd most popular FDI destination after Poland, with a 16 percent share in 2020, up from the 3rd spot in 2019”.
3. The favourable geographical location
Turkey has the dual advantage of being the most eastern country in the European continent, and the most Western part of the Middle East. This geographical edge makes it a prime location for businesses to open, as, in the words of Doing Business Guide, it’s “a gateway to the markets of Central Asia, South Caucasus and the Middle East”.
The business opportunities this presents should not be understated. As a Senior Trade Commissioner in Turkey argues, the country’s position in being surrounded by these major economies means that it can offer unique access to a “multi-country market of 1.5bn people worth about US$24 trillion within a four-hour flight radius”.