Turkey WT/TPR/S/259 
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IV. TRADE POLICIES BY SECTOR 
(1) AGRICULTURE  
(i) Main features 
1. Agriculture remains a key sector in Turkey , although its share in the economy has been 
declining as a result of structural change towards services and industry.1  Primary agriculture 
contributed 8.4% to GDP and 25.2% to employme nt in 2010, which implies that labour productivity 
was considerably lower than in th e rest of the economy.  Turkish agriculture is still dominated by 
small-scale and semi-subsistence family farms2, which is why labour productivity has been lagging 
(the lowest among OECD countries).3  Further integration of the large informal sector (i.e. much of 
Turkish agriculture) into the market economy requi res substantial agricultural policy reform, and 
modernization of the agriculture sector.  
2. Turkey ranks amongst the largest agricultural producers in the world.  The main crop is 
wheat.  In the period under review, the country has been a net-importer of wheat (over 90% self-sufficient) and corn (about 80% self-suffi cient), and a net-exporter of barley.
4  Other major crops 
include fruit and vegetables, nuts, tobacco, cotton, a nd sugar.  Irrigation is used for about half of 
Turkey's crop land, and agriculture accounts for about 75% of total water consumption.  It is likely 
that agriculture will have to bear the main burden of adjusting to increasing water scarcity.5  Turkey is 
one of the major milk producers in the world, pr edominantly for domestic consumption of cheese and 
yoghurt.  While Turkey has specialized feedlots and dairy farms, and large-scale commercial poultry 
farms, livestock production is mainly extensive a nd small-scale.  For livestock products, Turkey is 
more or less self-sufficient. Foot-and-mouth disease is endemic in parts of Turkey. The last outbreak 
occurred in 2009, according to the authorities, and the Trace region has been recognized by OIE as an 
FMD-free region, with vaccination in May 2010.   
3. Turkey remains a net-exporter of agricultural pr oducts.  Since its last Review, the share of 
agricultural trade (both imports and exports) in Tu rkey's trade in goods has increased (Tables AI.1 
and AI.3).  The main traditional exports include hazelnuts (largest exporter in the world), fruit and 
vegetables, and oriental tobacco.  Turkey's main market for agricultural products is the EU, followed 
by the United States.  Turkey uses export subs idies for a number of agricultural products.  
(ii) Policy framework 
4. As part of the structural reforms of the ec onomy, following the Turkish financial crisis 
in 2001, the Government launched the Agricultura l Reform Implementation Project (ARIP), which 
marked a significant policy shift towards liberaliz ation and increased market-orientation of the 
agriculture sector.  Steps were taken to abolish tr aditional instruments of support (administered prices 
for agricultural commodities, credit,  and other input subsidies) and replace them with direct income 
support, cushioned by some transitional assistance.6  The ARIP was phased out in 2008.  
                                                      
1 The structural adjustment of the agriculture sector has been quite re markable over the past decades; in 
1980 agriculture's shares in Turkey's GDP and employment were at 23% and 50%, respectively.  
2 The average size of Turkey's 3 million farms is 5 hectares, and holdings are often split up into small 
parcels because of Turkish inheritance laws (OECD, 2011b). 
3 Ministry of Agriculture and Rural Affairs (undated), p. 13. 
4 Turkish Grain Board (2011). 
5 OECD (2010a). 
6 WTO (2003) and (2007). WT/TPR/S/259 Trade Policy Review 
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5. Turkish agricultural policy is governed by the Agricultural Strategy 2006-10, the Agricultural 
Law (No. 5488) of 2006, and the Strategic Plan  (2010-14), which were adopted with a view, inter 
alia, to aligning Turkey's agricultural policy more cl osely with the EU Common Agricultural Policy.  
Turkey's main policy objectives are food security and food safety, and raising the self-sufficiency 
level for selected net-imported products;  impr oving productivity and competitiveness;  ensuring 
sustainable farm incomes;  rural development;  a nd improving institutional capacity.  The Agricultural 
Law provides for the continuation of the direct income support policy initia ted under ARIP (45%), 
and specifies complementary instrument to support agriculture:  deficiency payments (13%);  compensatory and transitional payments (5%);  li vestock support (12%);  crop insurance support 
(5%);  rural development support (10%);  envi ronmental payments (5%);  and other (5%).
7  Actual 
payments have diverged considerably from these targets since Turkey has moved away from direct 
income support towards deficiency payments and other instruments of support, mainly area-based 
payments.  Agricultural support budget allocati ons for 2010 were:  area-based support (38%)8, 
deficiency payments (32%), livestock support (22% ), rural development support (3%), agriculture 
insurance support (1.25%), compensatory payments (1.35%) and other (2.4%).   
6. Since its last Review, Turkey has modified its rural development strategy.  Beyond its 
traditional focus on infrastructure projects, rura l development now embraces objectives such as 
income diversification (e.g. rural tourism), devel opment of human resources, and the preservation of 
the environment.  Rural development is crucial in Tu rkey, given that most of the rural labour force is 
employed in agriculture, and education and skills ar e lacking.  As part of the accession partnership 
between Turkey and the EU, an IPARD framework  was established (Pre-Accession Assistance Rural 
Development Programme), which sets out Turkey's measures for 2007-13 to achieve consistency with 
EU's rural development policy and the CAP.9  The IPARD programme identifies the key sectors 
requiring further assistance to comply with EU regul ations (dairy and meat, fruit and vegetables, and 
fisheries).  IPARD measures (co-financed by the EU) include investment aid to modernize 
agricultural production, processing and marketing; ca pacity-building and support for producer groups; 
environmental measures, and diversification measures.   In 2010, Turkey adopted a new national Rural 
Development Plan (2010-13), which focuses on ru ral employment, human resources and poverty, 
settlement and infrastructure, environment and natu ral resources.  Projects involve co-financing the 
beneficiaries to mobilize private-sector resources.  
7. Turkey's institutional and regulatory framework in  agriculture is complex.  A large number of 
institutions are involved in implementing agricultu ral policy, some of which have authority in 
regulating agricultural markets (including agricultu ral state-owned enterprises, the Turkish Sugar 
Authority;  and the Tobacco and Alcoholic Mark et Regulatory Authority).  In addition to the 
restructured Ministry of Food, Agriculture and Livestock, various agencies are responsible for 
channelling support payments or subsidized credit to farmers, including the Agricultural Bank of 
Turkey (Ziraat Bank), agricultural credit coopera tives, and agricultural sales cooperatives unions.  A 
feature of Turkish agriculture is its widespr ead cooperative organization, ranging from production 
cooperatives (e.g. irrigation and sugar beet coopera tives) to credit and marketing cooperatives.   
(iii) Border measures 
8. Turkey's applied MFN tariffs on agricultural pr oducts, averaging 46.5% in 2011, are generally 
quite high compared with tariffs on non-agricultural products (WTO definition) (Table III.1).  Applied 
tariffs are highest for meat and live animals, follo wed by dairy products (C hart III.2).  SPS-related 
                                                      
7 The numbers in parentheses indicate the Agricultural Strategy's targeted budget allocations for 2010.   
8 Area-based support encompasses a number of measures, including input subsidies, support for 
hazelnuts, support for organic farming, and soil analysis. 
9 Ministry of Agriculture and Rural Affairs (undated). Turkey WT/TPR/S/259 
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import restrictions on meat and live animals maintained since 1996 were relaxed in 2010 
(Chapter III(3)(iii)).  In 2010-11, Turkey allowed tariff-quota imports of beef and slaughter cattle.10  
Applied tariffs are comparatively low on production in puts and raw materials such as cotton, oilseeds, 
or seeds and breeding animals.  Applied tariffs on some commodities such as wheat, rice, and red 
meat, have been adjusted temporarily to res pond to supply and demand conditions on the domestic 
market.  Turkey has some latitude in this regard , given the considerable gap between applied and 
bound tariffs (Chart III.2). 
9. Applied MFN tariffs on processed agricultural pr oducts comprise an agricultural component 
and an industrial component:  the latter is subject to  the applicable EU common external tariff.  For 
imports from the EU, the industria l component is duty free, while the agricultural component is 
subject to preferential tariffs.  In addition, duty-free tariff quotas apply for imports of certain processed agricultural products from the EU.  
10. Turkey has no WTO tariff-quota commitments  but maintains numerous tariff quotas under 
preferential agreements (Table AIII.5).  The Gove rnment has also been using unilateral tariff quotas 
as a trade policy instrument to facilitate imports. Th e Ministry of Economy is responsible for tariff 
quota licensing procedures.  Tariff quotas are genera lly allocated on the basis of first-come-first-
served and/or past-performance criteria,  as published through communiqués in the Official Gazette .  
Under the past-performance method, part of the tari ff quota is allocated equally to applicants and the 
remainder is allocated taking into consideration, inter alia,  the import performance and the production 
and consumption rates of the importer/producer s. There no charges or fees for tariff-quota 
applications. 
(iv) Domestic programmes 
(a) Direct income support 
11. Direct income support  was first introduced in 2001 to align Turkey's system of agricultural 
support with the "single payment scheme" under the EU reformed CAP.  The payments to Turkish 
farmers were to partially compensate their income  losses arising from the removal of administered 
prices (i.e. guaranteed minimum prices).  Payments were set at a uniform rate, up to a ceiling of 50 ha, 
with no requirement to produce anything in order to  receive the payment.  Such schemes can help 
reduce the distortions in the agriculture sector since they are not linked to the type of crop or the 
volume of production.  The DIS scheme covered about two thirds of Turkey's agricultural area in 2008 but was phased out in 2009.  The National Fa rmer Registration System was established to 
implement the direct income support scheme.  Th e OECD notes that "an accurate, reliable and 
transparent" registry is critical for the functioning  of direct payments and other area-based payments.
11  
It appears, however, that a lack of familiarity w ith decoupled payments, pa yments delays, and other 
concerns made the direct income support scheme unpopular among farmers.  The authorities note that Turkish agricultural policy is in a process of tran sition and that the Government plans to provide 
direct payments in the future, while the agricultu ral support model applied in the EU will be adopted 
after full membership. Turkey is taking steps in this direction.  The authorities expect that the Strategy 
on the Identification of Agricultural Lands, and the National Farmer Registration System will enable 
                                                      
 10 Tariff quotas were opened for 7,500 tonnes of beef at an in-quota tariff of 25% and for 16,000 tonnes 
of live slaughter cattle at 10% import duty. A duty-free tariff quota equivalent to 100,000 tonnes of live bovine 
animals (excluding for pure-bred breeding) has been a llocated for the usage of the Meat and Fish Board until 
end 2011.  
11 OECD (2011b). WT/TPR/S/259 Trade Policy Review 
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Turkey to meet the EU Land Parcel Identification System (LPIS) standards and enhance its capacity 
for implementing decoupled supports.12 
12. Most of Turkey's domestic agricultural programmes provide incentives to producers through 
instruments such as deficiency payments or input subsidies, to stimulate production of selected net-
imported crops and livestock products.  For surplu s crops, the Government tends to favour supply 
management through production controls or incenti ve payments encouraging farmers to switch to 
alternatives.  There are also intervention purchase programmes implemented by state-owned 
enterprises (see next section). 
(b) Deficiency payments 
13. The effect of a deficiency payments scheme on production is similar to that of an 
administered price system as it guarantees producers a minimum price. During the review period, deficiency payments were granted mainly for wheat, cotton, sunflowers, maize, tea, barley, and milk 
(Table AIV.1).  The deficiency payments are made  in the form of premium payments per unit of 
output, and have varied considerably from year to  year.  The payment rates are determined on the 
basis of production costs, market conditions, and bud getary considerations.  Sunflower seed, soybean, 
rapeseed, safflower, olive oil, cotton seed, and te a are the commodities eligible for deficiency 
payments in 2011.  In 2010, a novel deficiency payment scheme was intr oduced, whereby payments 
per kg or head of livestock are differentiated betw een Turkey's 30 agricultural regions (basin-based 
support programme).  The related legi slation requires the Cabinet to de termine "the agricultural basins 
where agricultural production is to be concentrated , supported, organized and specialized according to 
the regions' ecological conditions".  The objective of  the programme is to increase productivity, with 
crops to be produced based on the most suitabl e ecological conditions.  The boundaries of these 
30 agricultural basins were established in 2009, based  on a model developed by the Ministry of Food, 
Agriculture and Livestock. 
(c) Input subsidies 
14. Input subsidies  include concessional loans and support for livestock (see below) 
(Table AIV.1).  Concessional loans carry a subsidy element ranging from 25% to 100%.
13 Diesel and 
fertilizer subsidies were introduced in 2007 to reci pients of direct income support.  While direct 
income support payments have been terminated, diesel and fertilizer subsidies continue.  The 
subsidies are paid on a per-hectare basis and vary by crop .  Diesel payments range from TL 2 to 5/ha 
for fruit and vegetables, to TL 60/ha for industrial cr ops; the respective fertili zer payments range from 
TL 3 to 5/ha to TL 60/ha. Insurance for crops and livestock against natural disasters was introduced 
in 2006;  50% of the premiums are subsidized (A griculture Insurance Law No. 5363 of 2005).   
(d) Livestock support 
15. Domestic support for livestock includes milk incen tive premiums for milk delivered to dairies 
(deficiency payments), support for imported breeding cattle for "livestock improvement" 
(Table AIV.1), support for artificial insemination, and feed crop premiums.  Under the Investment 
                                                      
12 The Government also plans to establish an Integrated Administration and Control System (IACS), a 
tool used by the EU for managing the system of payments to agricultural land and other instruments of the 
Common Agricultural Policy. 
13 Activities eligible for concessional loans include good agricultural practices, organic farming, 
production of certified seeds, agricultural research and development, breeding dairy cattle, irrigation, 
mechanization (except tractors and harvestors), greenhouse horticulture, medicinal crops, milking units, and cooling tanks. Turkey WT/TPR/S/259 
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Encouragement Programme  (Chapter III(1)(iv) and (3)(i)), which has regional and horizontal 
objectives for the Turkish economy as a whole, certain investments in primary agriculture qualify for 
incentives (tariff and tax exemptions, interest rate subsidies).  Eligible investments include dairy 
farms with at least 150 cattle and dairy product manufacturing, integrated with fodder production 
and/or cold storage warehouse;  feedlots (with at least 150 cattle per fattening period) integrated with 
a slaughterhouse and cold storage warehouse and/or fodder production unit and/or meat production unit;  greenhouse production;  and mushroom cultivation.
14 
(e) Production controls 
16. Under ARIP, one-off transitional payments were  made to producers of hazelnuts and tobacco 
to address structural surpluses and to encourage farm ers to grow alternative (deficit) crops, such as 
oilseeds, feed crops, and corn.  The deadline for production contro l measures in tea with income 
compensation payments expired in August 2011, (i.e . payments for pruning, after which tea leaf 
output drops).  As previous measures to cont rol hazelnut production have proved ineffective, 
according to the OECD, hazelnut producers have received payments since 2009 based on a fixed area (TL 1,500/ha per year).
15  Sugar beet production is restricted through a national sugar quota 
(2.2 million tonnes in 2011).  The quota is fixed annu ally by the Sugar Board and allocated to sugar 
factories.   
(f) Environmental measures 
17. Environmental issues, particularly soil eros ion and overuse of water resources because of 
poor water management, have become a concern in  Turkish agriculture, as reflected in Turkey's 
Agricultural Strategy and the Rural Development Strategy.  Since 2005, environmental payments 
have been made under the Environmentally B ased Agricultural Land Protection Programme 
(ÇATAK), to compensate farmers for setting aside  land and using soil conservation techniques in 
environmentally vulnerable areas (see "land compensation" in Table AIV.1).16  Area-based payments 
range from TL 300 to TL 1,350 per ha.  Organic farming and "good agricultu ral practices", aimed, 
inter alia,  at protecting natural resources, traceability,  and food safety, are also supported. Support 
under good agricultural practices is at TL 200/ha fo r fruits and vegetables, TL 800/ha for greenhouses, 
and TL 250/ha for organic farming. 
(v) Agricultural state-owned enterprises 
18. Some agricultural state-owned enterprises (SOEs)  continue to play a role in production, 
processing, and marketing of agricultural produc ts, and in supporting and regulating designated 
agricultural commodity markets on behalf of the Government but, overall, the significance of SOEs 
has diminished.  SOEs include the Turkish Gr ain Board (TMO), the Turkish Sugar Factories 
Corporation (T ŞFAŞ), the Tobacco, Tobacco Products, Salt and Alcohol Enterprise Corporation 
(TTA), the Meat and Fish Board (EBK), and ÇAY KUR (tea) (Table III.19).  Budgetary transfers to 
cover the debts and "duty losses" of SOEs have  been substantial (Table AIV.1).  The TTA17 and the 
TŞFAŞ are in the process of privatization, while the TMO (for cereals) and EBK (meat processing) 
are to be restructured as paying agencies in accordance with the EU harmonization programme.  
                                                      
14 WTO document G/SCM/N/186/TUR, 2 March 2010. 
15 OECD (2011b). 
16 Soil Conservation and Land Use Law No. 5403.  See WTO (2007). 
17 Formerly named TEKEL; the tobacco production un it of TEKEL was privatized in 2008 (OECD, 
2011b). WT/TPR/S/259 Trade Policy Review 
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19. Most administered prices, including for cer eals and paddy rice, have been abolished 
since 2002.  However, some of the SOEs, such as  the TMO, continue to set purchase/intervention 
prices, which, according to the authorities, are fixe d by the respective board of directors in line with 
market conditions. With the exception of opium, the SO Es do not operate as the sole buyer or seller in 
the domestic market nor do they hold an export monopoly.18  The TMO had a maximum market share 
of 18% in 2007-10 in terms of purchases of Turkey 's annual wheat production (17% for barley, and 
19% for corn).19   
20. The OECD notes that agricultural SOEs have sy stematically benefited from payments from 
the Treasury to bridge the gap between purchase /intervention prices and export prices (duty loss) 
(Table AIV.1).20  Article 35 of Decree law No. 233 provides that a "duty loss" may occur (i) when 
SOEs are assigned a task (duty) related to their ac tivities by the Council of Ministers and a loss occurs 
or profit is forgone due to this task;  and (ii) when prices of the goods and services produced by SOEs 
are determined by the Council of Ministers and th ese prices are below cost.  The authorities claim that 
no export subsidies are being implemented by stat e-owned enterprises.  They note that SOE losses 
arise from various "duties", including hazelnut purchases and sales. 
21. The TMO sells domestic wheat at world market prices to domestic manufacturers of flour and 
pasta in volumes that are related to their exports of flour and pasta; and exports surplus stocks through 
international competitive tenders (in accordance wi th the Turkish Grain Board Tender Regulation).21  
TMO is also responsible for holding emergenc y stocks (Decree Law 2006/10506).  These activities 
have involved duty losses, as domestic wheat prices have  been substantially higher than world market 
prices.22   
22. In tobacco, the export share of TEKEL/TTA (compared with the private sector) varied 
between 29% and 68% in volume terms in 2007-10.  The TTA does not enter into contracts for tobacco production nor does it purchase tobacco from other firms.  ÇAYKUR export prices for tea are determined by its Board of Directors on the basis of world market prices. Manufacturers that use sugar as a raw material are eligible to purchase do mestic sugar production at world market prices 
(C sugar). 
(vi) Export measures 
23. Turkey maintains an export subsidy programme  for agricultural products with the aim of 
developing its export potential in value- added processed agricultural products.
23 Sixteen product 
groups are eligible to receive export subsidies (Table AIV.2).  Turkey's WTO export subsidy 
reduction commitments cover 44 product groups (at the HS four-digit level).24  Export subsidies are 
                                                      
18 The TMO is responsible for purchasing and exporting all of Turkey's opium production at prices 
announced by Council of Mi nisters' Decision.    
19 The TMO's purchase (interventio n) prices and sales prices ar e determined, taking into account 
"production costs, inflation rate, production quantity, developments in the world markets, prices of previous 
year and sustainability of the production".  See Turkish Grain Board (2011). 
20 OECD (2011b), p. 43. 
21 In the Committee on Agriculture, Turkey responded to questions regarding implementation of its 
commitments for exports of wheat flour (WTO document G/AG/R/51, 6 June 2008). 
22 Directorate General of State Owned Enterprises (2008 ), p. 84.  See also Undersecretariat of Treasury 
online information, "State Owned Enterprises Sta tistics".  Viewed at:  http://www.treasury.gov.tr/ 
irj/portal/anonymous?NavigationTarget=navurl://263c93ab665e5050055e7fe7606 abf8f &LightDTNKnobID=-1969438794.  
23 WTO document G/SCM/N/186/TUR, 2 March 2010. 
24 WTO online information.  Viewed at:  http://www. wto.org/english/thewto_e/countries _e/ turkey 
_e.htm.  Turkey WT/TPR/S/259 
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granted in the form of reductions of the exporters ' debts vis-à-vis public corporations (for example, 
deduction of taxes, telecommunications or energy bills).  Export refunds are specified through annual 
decree and administered by the Ministry of Eco nomy;  goods must be of Turkish origin and of 
marketable quality.  All destinations are eligible, including to the EU.  
24. Exporters of agricultural products are eligib le for generally available export credits 
(Chapter III(2)(iv)).  Export taxes are levied on h azelnuts and raw skins (Chapter III(2)(ii)).  Turkey 
prohibits exports of a number of agricultural products  (Table III.14).  Export licensing applies to sugar 
and feedstuffs for monitoring purposes (Table III.15). 
(vii) Evolution of support and protection 
25. This overview of support and protection of Turk ish agriculture relies to a large extent on 
OECD data and analysis, since Turkey has not provided any domestic s upport and export subsidy 
notifications to the WTO since 2002.  Members ha ve expressed concern about Turkey's outstanding 
notifications in the Committee on Agriculture.25  Since its last Review, Turkey has abandoned its 
direct income support policy and increased considerably the level of market price support, deficiency payments, and other production-stimulating instru ments of support, in particular on net-imported 
products.
26    
26. Market price support remains the main instrume nt of support to Turkish agriculture: it 
encompasses all policy measures that raise the dom estic price relative to the border price of the 
commodity concerned, including border measures (tari ffs, tariff quotas, and other import restrictions); 
intervention prices, and export subsidies.  In the period under review, about 80% of Turkey's Producer 
Support Estimate (PSE)27 has been production-stimulating mark et price support, pushing domestic 
commodity prices above international prices and "taxing" Turkey's consumers in a manner that is not transparent for them (the remaining 20% has been  budgetary payments under domestic programmes).  
Turkey's market price support has increased in rece nt years, mainly due to higher domestic prices 
rather than lower world market prices.  However, market price support tends to be capitalized in the 
value of agricultural land, as a result of which only a small fraction of the support ends up as farmers' 
income;  it also impedes expansion in farm size and growth in productivity.  Moreover, market price 
support distorts the price signals for farmers to respond to market demand and produce the products in 
which Turkey has a comparative advantage.  Green  Box measures have low priority in Turkey's 
agricultural budget, although experience from othe r countries shows that research, training, and 
extension have positive long-term effects for productivity and competitiveness.   
27. The nominal protection coefficients (NPC) of some of the main commodities are generally 
higher than the OECD average, reflecting Tu rkey's high levels of market price support.
28  The average 
NPC was 1.23 in 2010, meaning that Turkey's average producer prices were about 23% higher than border prices (Chart IV.1).
29  The effective protection rates may be lower for products where negative 
tariff escalation exists, for example, processed dairy, meat and grain products.  
                                                      
25 WTO document G/AG/R/60, 19 January 2011, p. 6. 
26 Turkey has no domestic support reduction (AMS) commitments under the Agreement on 
Agriculture.  The applicable de minimis  ceiling of support is 10% of the value of production. 
27 PSE is total annual monetary transfers to farmers individually (not agriculture generally) from: 
market price support mainly through border measures but also food aid, export subsidies (calculated by the price 
gap between domestic and border price); payments to farmers; and tax/fee reductions (revenue forgone). 
28 The average producer price includ es payments based on current out put, e.g. deficiency payments, 
which are not included in the estimate of market price support.   
29 OECD (2011a). WT/TPR/S/259 Trade Policy Review 
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1.401.46
1.301.411.793.15
1.66
1.211.44 1.41
0.00.51.01.52.02.53.03.5
Wheat
Maize
Other grains
Sunflower
Sugar
Milk
Beef and veal
Sheepmeat
Poultry
EggsChart IV.1 
Nominal Protection Coefficients of selected agricultural commodities 
2007-09 average
Source: OECD, PSE/CSE database, 2010.OECD Turkey
 
28. Overall, thought substantial increases in s upport and protection for agriculture, Turkey's 
agriculture has become le ss market oriented.  According to th e OECD, the level of support (PSE) in 
Turkey, measured as a percentage of gross farm revenues, declined in relative terms from 38% in 
2006 to 25% in 2008 rising to 28%, in 2010, meaning that 28% of farmers' revenues were due to 
support policies (financial support, tari ff and other border protection).30  While the long-term OECD 
trend has been declining levels of support (per centage PSE), Turkey has been moving in the opposite 
direction (Chart IV.2).  Turkey's percentage PSE has long been lower than the OECD average, but 
now exceeds it.  Moreover, contrary to the OECD tr end, Turkey continues to deliver most of its 
support and protection in the potentially most trad e-distorting manner (support tied to production or 
input use).  Turkey has become an outlier in the OECD because (i) the value of its support to 
agricultural producers (in absolute terms and as a pe rcentage of the agricultural production value) is 
increasing;  and (ii) an increasing portion of its supp ort is provided in the most trade-distorting ways. 
                                                      
30 The percentage PSE is a useful indicator for comparisons over time and among countries, inter alia , 
because it eliminates the effect of inflation.  Turkey WT/TPR/S/259 
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0102030405060708090100
0 1 02 03 04 05 06 07 08 0Chart IV.2
Turkey's level and composition of  support to agricultural producers
The level of support is presented by the percentage PSE. The composition of support is presented by the share 
in gross farm receipts of market price support, payments based on output and payments based on non-
constrained variable input use.Note: Turkey
OECD
2008-101986-88
1997-99Share of support based on commodity 
output and non-constrained variable 
input use in the PSE
PSEPer cent
OECD, PSE/CSE database, 2010. Source : 
(2) ENERGY  
29. Turkey's primary energy consumption totalled 80.5 million tonnes of oil equivalent (toe) 
in 2009.  Although consumption declined between  2007 and 2008 due to the slowdown of economic 
activity, on average Turkey's energy market has expanded by 4% annually over the past decade.  
Fossil fuels (coal, oil, natural gas)  constitute almost 90% of the pre sent energy supply.  As Turkey has 
a young and urbanizing population and its per capita  consumption is still below the average of 
industrialized countries, it is expected to experi ence the fastest medium- to long-term growth in 
energy demand among members of the International Energy Agency.31  By 2020, Turkey's primary 
energy demand is expected to reach 222 million toe.   
30. The projected increase in energy demand will requi re considerable investments to expand the 
energy infrastructure.  As the private sector is  expected to lead the way in financing these 
investments, the Turkish Government has taken steps to reduce its own involvement on the supply 
side, and provide a more transparent, predictable,  liberalized and competitive framework for privately 
owned operators in the energy market.  Between 2001 and 2007, Turkey passed new legislation to 
reform the energy sector, including the Electricity  Market Law (2001), the Natural Gas Market Law 
(2001), the Petroleum Market Law (2003), the Liquefied Petroleum Gas (LPG) Market Law (2005), 
the Law on the Utilization of Renewable Energy Sources for the Purpose of Generating Electrical 
Energy (2005), the Energy Efficiency Law (2007) , the Law on Geothermal Resources and Natural 
Mineral Waters (2007), and the Law on Constructi on and Operation of Nuclear Power Plants and 
Energy Sale (2007).  The Energy Market Regulat ory Authority (EMRA) was established in 2001 to 
perform independent regulation and supervision of th e market and its operators.  Despite the reform 
efforts, Turkey's market for petroleum and petrol eum products is still dominated by large state-owned 
                                                      
31 IEA (2009). WT/TPR/S/259 Trade Policy Review 
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or former state-owned enterprises, i.e. the Turk ish State Petroleum Company (TPAO), the Turkish 
Petroleum Refinery Corporation (TÜPRA Ş), and the Petroleum Pipeline Corporation (BOTA Ş).   
(i) Oil and oil products 
31. Turkey has its own resources of oil and natura l gas, but domestic production covers no more 
than 8% of its needs.  Turkey 's oil resources are owned by the State, which grants licences for 
exploration and production.  TPAO, which is wh olly state-owned, accounts for almost 75% of 
domestic production, the remainder is extracted by smaller independent upstream companies.  
Imported crude oil (17.3 million tonnes in 2010) is predominantly sourced from Iran, the 
Russian Federation, Saudi Arabia, and Iraq.   
32. TÜPRAŞ, which was privatized in stages in 2005 and 2006, controls nearly all the refining 
capacity in Turkey.32  However, the EMRA has issued li cences to two enterprises to build new 
refining capacity, as well as wholesale licences to 52 dom estic and foreign companies.  In 2010, the 
wholesale enterprises imported some 8.5 million tonnes of petroleum products.  Turkey also imported 3.7 million tonnes of liquefied petroleum gas in 2010, supplementing do mestic production of 
650,000 tonnes.
33  The EMRA has licensed nearly 24,000 opera tors to engage in importation, refining, 
transportation, storage, wholesale or retail trade in petroleum products and LPG by the end of 2010.  
The pricing of petroleum products was liberalized on 1 January 2005.   
33. The main objective of Turkey's energy policy is to ensure supply security.  The stockholding 
capacity remains limited.  On the other hand, Turkey  has secured agreements with some of the world's 
major suppliers of oil and gas in its vicinity.  The ag reements have also enhanced Turkey's status as an 
important transit country.  Two major internatio nal oil pipelines cross Turkey:  the Iraq-Turkey 
pipeline with a throughput capacity of 1.4 million ba rrels/day and the Baku-Tbilisi-Ceyhan crude oil 
pipeline, which may transport 1.2 million barre ls/day.  Further pipeline projects are under 
consideration.   
(ii) Natural gas 
34. Turkey's consumption of natural gas has incr eased rapidly since it was introduced as a source 
of energy on a commercial scale in 1987.  In 2008, natural gas overtook oil as the principal source of 
primary energy.  Of the 37.4 billion cubic metres c onsumed in 2010, around half was used in gas-fired 
power plants;  industrial and other commercial users took 32%, while households consumed the 
remaining 17% (district heating, cooking, etc.).  As Turkey's domestic production of natural gas is 
now negligible, the gas is mostly  imported on long-term (20 to 25-year) contracts.  Turkey has 
concluded eight sales and purchase agreements with six supplying countries; the Russian Federation, 
Turkmenistan, Iran, Azerbaijan, Algeria, and Nigeri a.  The natural gas from the Russian Federation, 
Iran, and Azerbaijan arrives via pipelines, while gas from Algeria and Nigeria is shipped in the form 
of LNG.34  Turkey has a connection with Greece for export purposes.  Planned pipeline projects may 
further diversify Turkey's sources of imports and streng then its role as a transit country.  In particular, 
the Nabucco Pipeline Project, linking consumers in Central and Eastern Europe with gas from the 
Caspian Sea and possibly also suppliers in the Mi ddle East, gives Turkey a key role in opening the 
fourth supply corridor for na tural gas into Europe.   
                                                      
32 TÜPRAŞ is currently a joint-venture between Koç (51%) and Shell (49%).   
33 A particular feature of the Turkish market  is the use of LPG as an automotive fuel. 
34 Although the 30-year contract with Turkmenistan was signed in 1999, implementation still requires 
the establishment of transit regimes and the construction of pipelines.   Turkey WT/TPR/S/259 
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35. The purpose of the 2001 Natural Gas Market Law was to harmonize Turkey's legislation with 
the EU acquis , reduce the role of the State in the sector,  and establish a truly competitive gas market 
in Turkey, thus breaking up the monopoly of BOTA Ş.  Unbundling its transmission, distribution, and 
trading activities (by 2011), the intention has been to privatize the storage and trading arms of 
BOTAŞ.  The state-owned company will continue to operate a monopoly on the pipeline transmission 
grid, with private companies operating competitiv ely in all other segments of the market.   
36. The EMRA, the licensing, regulatory, and surv eillance authority, began issuing licences to 
operators in the natural gas market in November  2002, and had issued a total of 198 licences by 
May 2010.  However, even though the Law envisaged limiting the share of any importer or 
wholesaler to maximum 20% of the market by 2009, BOTA Ş still dominates the wholesale market for 
natural gas.  BOTA Ş was given the option of reducing its share by contract transfer or volume 
transfers to private enterprises, but the implementa tion of the contract release programme has been 
slow.  A tender for 4 billion cubic metres per year for 15 years (12% of the current import volume) 
was held in 2005.  All four companies that won the tender had begun importing gas by April 2009.  
Nevertheless, as suppliers of gas ha ve been reluctant to conclude c ontracts with companies other than 
BOTAŞ, its share of Turkey's gas imports remained at 84% in 2010.35   
37. Turkey has been significantly more successful in its deregulation efforts on the distribution 
side.  In order to stimulate the use of natural gas in district heating, Turkey has been divided into 
60 distribution regions, with the EMRA awarding distribution licences through an auction system.  Successful bidders have also undertaken commitments to  invest in extensions of the local distribution 
networks.  Except for two regions (Istanbul and Ankara ), where privatization is currently under way, 
the distribution of natural gas in Turkey's cities is  now in the hands of the private sector.  As for 
power generation, the privatization process for the Hamitabat gas-based power plant, owned by the 
Electricity Generation Co. Inc. (EÜA Ş), commenced in 2011.   
38. Third-party access to the distribution and tr ansmission network is regulated and non-
discriminatory.  The operators must demonstrate to  the EMRA that their operations are cost-efficient 
and reliable.  The EMRA regulates and approves tran smission and all retail tariffs, and will continue 
to regulate storage tariffs until the market has b ecome more competitive.  The tariffs set by the 
distribution companies comprise the city-gate gas price paid to the suppliers plus a service and 
depreciation charge, determined by their tender.   
(iii) Coal 
39. Turkey has significant proven reser ves of coal, mostly lignite.
36  The domestic coal is 
primarily absorbed in electricity generation (87%), but locally mined coal is also used in industrial 
processes as well as for heating.  Turkey's producti on of lignite rose by nearly 10 million tonnes 
from 2000 to 2010 due to the rising demand for electric ity.  Turkey is self-sufficient in lignite 
consumption, whereas it imports around 90% of hard co al demand.  Hard coal is imported in the form 
of steam coal from the Russian Federation, and coki ng coal from the United States and other suppliers 
(e.g. Australia, Colombia, South Africa). 
40. Of the 72 million tonnes of coal mined in Tu rkey in 2010, 92% was produced by three state-
owned companies (the Turkish Coal Enterprises (T KI), the Electricity Generation Co. Inc. (EÜA Ş), 
and the Turkish Hardcoal Enterprises (TTK).  Ho wever, as much as 35% of their reported production 
                                                      
35 The Law was amended in 2008 to liberalize spot and long-term imports of LNG.  By 2011, 
26 companies (including BOTA Ş) had been granted import licences for LNG. 
36 The quality of Turkish lignite is generally poor. WT/TPR/S/259 Trade Policy Review 
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is effectively mined by sub-contracted private-sector companies.37  TKI and TTK determine their own 
prices for hard coal and lignite, taking into account world market prices, but the Turkish Government 
may also intervene in the price setti ng for economic or social reasons.   
41. Large-scale surface operations allow lignite to be  produced at relatively low cost in Turkey.  
TKI has therefore been able to establish prices that cover its costs, and the company has been 
profitable since 1995.  By contrast, TTK's producti on costs are well above comparable world market 
prices for the end product.38  TTK accumulated losses of some US$2.3 billion between 2000 and 
2009, covered by capital injections from the Treasury.  In 2010, TTK losses amounted to 
approximately TL 450 million, or nearly US$30,000 per employee.  The Treasury and other related 
institutions have launched a study to restruct ure TTK to minimize the company's losses.   
(iv) Electricity 
42. The demand for electricity in Turkey has followe d the same trend as the expansion in output 
over the last ten years, but at a faster pace.39  Projections suggest that the consumption of electricity, 
which was 209 billion kWh in 2010, may rise to 370- 390 billion kWh by 2019.  At present, roughly 
half of Turkey's electricity is generated in gas -fired power stations, one qua rter is derived from the 
burning of coal, and the remaining quarter consis ts of hydropower and other renewable sources of 
energy.  Turkey's power grid is linked to its neigh bours, and some exchanges of electricity take place 
in the course of the year;  however, the volumes are modest.40   
43. The 2001 Electricity Market Law, amended in 2008, and secondary legi slation pertaining to 
licensing, tariffs, grids, distribution, imports and exports, and balancing and settlement, constitutes the 
legal framework regulating the sector.  The 2001 Law unbundled the vertically integrated state-owned 
electricity company (TEA Ş) into three separate entities re sponsible for generation (EÜA Ş), 
transmission (TEIA Ş), and wholesale trade (TETA Ş).  The Turkish Electricity Distribution Company 
(TEDAŞ) was also restructured in 2005, and regi onal distribution companies were formed and 
prepared for privatization.  Private-sector partic ipation in power generation and distribution has been 
allowed since the mid 1990s, and the EMRA has beco me the regulator and licensing authority for all 
operators engaged in ge neration, transmission, distribution, wholesale, retail, importation, and 
exportation.41  The regime foresees the dominance of private enterprises in all activities, except 
transmission.  Licences are granted for minimum 10 years and maximum 49 years.42  Further plans for 
reforms, including a road map for a new wholesale market regime, are outlined in the Electricity 
Market and Security of Supply Strategy Paper of May 2009.  A major step was taken in early 2011 as 
customers purchasing more than 30,000 kWh per year were allowed to enter the wholesale market and 
                                                      
37 TKI has leased or sold some of its mines to the private sector.  EÜA Ş tendered a contract to produce 
and supply lignite to one of its power stations in 2007.  A subsequent tender for another two power stations was 
eventually cancelled after evaluation of the bids.  Pursuant to the Mining Law (2004), the TTK has used an 
option to transfer some of its rights to private undertakings on a royalty payment basis.   
38 Due to the geological conditions at the existing sites, the mining of hard coal is very labour intensive 
in Turkey.  In 2008, TTK's production costs averaged US$289 per ton, whereas the price per ton obtained in the 
domestic market ranged from US$50-55 in power generation to US$180 in iron and steel production.   
39 On average, the demand for electricity outpaced th e growth in GDP by 1.4%  annually between 2000 
and 2010.   
40 On average, Turkey has exported 2 billion kWh per year and imported 1 billion kWh.   
41 A separate licence is required fo r each activity and each facility.   
42 BOT and similar arrangements concluded prior to the 2001 Law remain valid until their expiry.   Turkey WT/TPR/S/259 
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thus negotiate directly with their supplier of choice.43  The strategy foresees that all consumers, 
including households, should be able to choose their suppliers by 2015.   
44. Retail tariffs (i.e. for "non-eligible" customers) , network tariffs and the wholesale prices of 
TETAŞ are regulated.  The wholesale tariffs are now fully cost-based.  Artificially low end-user 
tariffs, at times below production co sts, have contributed to occasi onal supply shortages in the past.44  
A new retail pricing mechanism was introduced in July 2008, involving automatic quarterly tariff 
adjustments based on changes in input prices (coal and natural gas), inflation, and movements in 
exchange rates.  All distribution companies are being subject to a uniform national retail tariff, 
approved by the EMRA, until the end of 2012.  The present system involves a certain amount of 
cross-subsidization due to cost differences betw een regions.  From 2013 onwards, the distribution 
companies will establish individual price caps,  subject to the approval of the EMRA.45   
45. Private investment accounted for 75% of th e new installed power-generation capacity 
between 2002 and 2009.  So far, private-sector opera tors have favoured gas-fired generation because 
of the short lead times.  Further new capacity to meet the projected rise in demand is likely to come 
from coal, hydropower, wind, and nuclear energy ra ther than natural gas.  Turkey has no nuclear 
reactors at present, but signed an intergovernment al agreement with the Russian Federation for the 
construction and operation of a nuclear power plan t at Akkuyu on the Mediterranean coast, in 
May 2010.  Sinop (on the Black Sea) has been iden tified as the site for the construction of a second 
nuclear power plant.   
(v) Renewable energy 
46. Although Turkey has steadily added new hydropower  stations to its generation network, the 
share of renewables in Turkey's total primary en ergy supply declined from 17% in the mid 1990s to 
9.4% in 2009.  The decline reflects the growing u se of natural gas in power generation, but also a 
massive shift from traditional use of biomass (fuelwood)  to more modern forms of heating.  The share 
of renewables rose in 2010 as new hydro and wind power plants were coming on stream.  As of 2011, 
Turkey had an estimated 16,160 MW of installed hydropower capacity in operation and a further 
14,600 MW under construction;  wind-power capacity in operation amounted to 1,360 MW with an 
additional 2,130 MW under construction Turkey h as established an overall target for renewable 
energy to constitute 30% of its electricity su pply by 2023, including capacity targets for wind 
(20,000 MW) and geothermal energy (600 MW).  Th e Turkish authorities also see some potential in 
solar energy and biomass. 
47. The legal framework, i.e. the Law on the Utili zation of Renewable Energy Sources for the 
Purpose of Generating Electrical Energy (2005) to gether with the Electricity Market Law and the 
Energy Efficiency Law, includ es several instruments to promote electricity generation from 
renewable sources of energy including feed-in tari ffs and purchase obligations, connection priority, 
reduced licence fees, and reduced fees for project preparation and land acqui sition.  Furthermore, 
the 2005 Law was amended in January 2011 to in troduce bonus tariffs for licence holders using 
locally manufactured mechanical or electro-mechanical components.  Under an implementing regulation issued on 19 June 2011, the beneficiaries must obtain a manufacturing certificate attesting 
                                                      
43 The eligibility threshold was 9 GWh per year when the wholesale market was first opened in 
March 2003, and was reduced to 3 GWh per year in 2007.   
44 Low tariffs, inter alia,  caused TEDA Ş to accumulate TL 4.5 billion in operating losses between 2006 
and 2008, and payment arrears affecting its suppliers of coal (TKI) and natural gas (BOTA Ş).   
45 The transition period contracts manda ting the electricity trade between TETA Ş and the distribution 
companies will expire by 2013.   WT/TPR/S/259 Trade Policy Review 
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that the components comply with international or Turkish standards, as well as a "manufacture status 
document" certifying that the components are manufactured in Turkey.   
(vi) Energy efficiency 
48. According to the International Energy Agency , Turkey has significant potential to improve 
the efficient use of energy in all sectors.  A more  sustainable transport system could save energy, 
avoid congestion, and improve air quality.  Build ings, which represent 37% of the final energy 
consumption, appear to offer the largest gains at  low cost.  Turkey's Energy Performance Regulation 
(2009), which sets the rules for policies indicated in the Energy Efficiency Law (2007), harmonizes Turkey's requirements with those of the Energy Performance of Buildings Directive No. 2002/91/EC.  
The regulation covers the energy performance of hea ting, cooling, thermal insulation, hot water, and 
electrical and lighting systems in dwellings as well as in commercial and services facilities, and 
provides an energy-savings potential of 30-50% in buildings.  Efficiency-enhancing projects may also be viable for industrial users.   
49. The distribution system for electricity is prone to significant losses and theft, although 
estimated losses and theft fell from 25% in 2002 to 14%  in 2009.  The tariff system is designed to 
encourage distributors to pursue such leakages.  From 2013, distribution tariffs will include a "loss-
theft" adjustment component, rewarding distribution co mpanies that beat their target loss-theft ratio.   
50. Turkey's per capita carbon emissions are incre asing.  Turkey became a party to the Kyoto 
Convention in 2009, but has preferred not to set an overall quantitative target to limit CO
2 emissions 
or a national emission target for 2020.   
(3) MANUFACTURING  
51. Turkey's transformation from an agrarian economy to manufacturing on a significant scale 
began in earnest in the early 1980s.  Turkey is now  a major producer and exporter of a wide range of 
machinery, appliances, and other industrial goods, as well as jewellery and furniture.  Three of the 
most prominent manufacturing sectors are highlighted below.  The most notable trend over the years has been the relative declin e in the share of textiles and clothing in total exports, as the sector played a 
key role in the earlier part of Turkey's export-oriented industrialization phase.   
(i) Automotive sector 
52. Turkey was the world's 16
th largest manufacturer of motor vehicles in 2010.  In Europe, 
Turkey is the leading manufacturer of commercial and light commercial vehicles, and the second most important manufacturer of buses.  Turkey's moto r-vehicle industry consis ts of 15 assemblers and 
manufacturers, and some 800 suppliers of comp onents.  The components subsector employs 
approximately 150,000 workers, while more than  40,000 people are employed in the assembly and 
manufacture of vehicles.  Annual production capaci ty exceeds 500,000 units of commercial vehicles 
and 800,000 passenger cars.
46  Turkey exported motor vehicles and spare parts worth almost 
US$17 billion in 2010.  About 73% of the producti on is exported to the EU, mainly to France, 
Germany, Italy, and the UK.47   
                                                      
46 The industry's objective is to raise its production capacity to 2 million units per year in the short-
term, and to 4 million units by 2023.   
47 At the same time, about 60% of all motor vehicles sold in Turkey are import ed.  For passenger cars, 
the import share is close to 70%.    Turkey WT/TPR/S/259 
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53. The industry is mostly foreign owned, joint ventures, or operating under foreign licence.  
Turkey has five passenger-cars ma nufacturers;  Oyak-Renault, Tofa ş (a Fiat S.p.A. and Koç Holding 
partnership), Toyota, Hyundai Assan, and Honda Turkey.  Ford Otosan and Tofa ş are the principal 
producers of commercial vehicles, followed by seven  other manufacturers.  Turkey also has two 
manufacturers of tractors.  Although the Turkish industry has been expanding rapidly, Otoyol and 
Askam (commercial vehicles) as well as Uzel Makine (tractors) have left the sector since 2007.  The 
global financial crisis also had a negative impact on many of Turkey's smaller component makers.   
54. Investment in Turkey's automotive industry has been attracted by relatively low labour costs, 
duty-free access to the EU market, and the good qual ity of the local components industry.  Although 
Turkey does not host its own automobile brand, many of the cars produced in Turkey are currently 
designed domestically.  In February 2011, the speci al consumption tax on motor vehicles was reduced 
from the ordinary rate of 37% to 3-15% for compar able cars with electric engines to stimulate mass 
production of electric automobiles in Turkey.   
(ii) Iron and steel 
55. The iron and steel industry has been the backbone  of industrialization in Turkey, commencing 
with the production of raw steel in Karabük in 1940.  The sector currently employs around 
200,000 people.  The industry is now  operated entirely by the private sector.  The privatization 
process, which began with the transfer of the loss-making Karabük Steel Mill (Kardemir) in 1994, 
culminated with the privatization of the Erdemir Group in 2006.48   
56. Accounting for just over 2% of global production, Turkey is the 10th largest producer of crude 
steel.49  Production capacity more than doubled from 2002 to 2010, and annual production rose from 
16.5 million tonnes to 29.1 million tonnes.50  According to the Turkish Steel Manufacturers' 
Association DÇÜD, annual output is projected to  reach 42 million tonnes in 2012.  The Turkish 
industry's output consists of long steel (75%) and flat steel products (25%).  Turkey is a major importer of scrap iron, and 72% of its steel producti on is currently made from recycled materials.  
Turkey imported iron and steel worth US$6.5 billion in 2009 (pipes not included);  imports of scrap 
iron amounted to US$7.1 billion in 2010.   
57. Exports from Turkey of iron and steel, including steel products, exceeded US$13 billion 
in 2010.
51  Turkey's principal export markets for iron and steel are located in the EU, the Middle East 
and in North Africa.  Although the Turkish steel in dustry produces most types of steel, the dominant 
output is lower value-added long steel used in construction.  Turkish producers meet 38% of the 
world's demand for long products.52  On the other hand, the needs for flat steel by Turkish 
manufacturers of motor vehicles, household appliances, and consumer electronics are mostly met through imports.  Accordingly, the Turkish steel  industry is channelling its investments into 
modernization and adding new capacity for flat steel to reduce the imbalance between the local 
production and consumption of long and flat steel.   
                                                      
48 Erdemir is Turkey's largest producer of steel with 26% of total output.  The group is now owned by 
Ataer Holding, a subsidiary of the Armed Forces Pension Fund (Oyak).   
49 Over the last ten years, the growth in Turkey's steel production has been surpassed only by China and 
India.   
50 Driven by the construction boom, domestic consumption of finished steel rose almost three-fold over 
the same period to reach 23.6 million tonnes in 2010.   
51 In volume terms, Turkey's exports amounted to  17.6 million tonnes of iron and steel.   
52 According to data from the Turkish Steel Manufacturers' Association, Turkey produced 19.7 million 
tonnes of long steel products in 2010, of which 11.6 million tonnes were consumed domestically and 8.1 million tonnes were exported.   WT/TPR/S/259 Trade Policy Review 
Page 96 
  
(iii) Textiles and clothing 
58. Since the elimination of quotas under the Agre ement on Textiles and Clothing at the end of 
2004, Turkey's industry has been facing increasing competition from low-cost producers in Asia, both at home and in its major export markets (EU, the Un ited States and the Russian Federation).  Turkey's 
textiles and clothing sector is dominated by priv ately owned small and medium-sized businesses.  
Turkey has more than 40,000 textile and clothi ng manufacturers producing for export.  The industry 
has responded to the competitive challenges by switchi ng to higher value-added finished products and 
ready-made clothing, necessitating product innovation as well as brand-building.  In Europe, Turkish 
exporters continue to capitalize on duty-free access and logistical advantages stemming from 
geographical proximity to their customers.   
59. The textiles and clothing sector still accounts for nearly 10% of Turkey's GDP and more than 
11% of the manufacturing labour force.  Traditionall y relying on an ample supply of local cotton, the 
industry has become increasingly dependent on imported cotton as domestic production has been in decline since the 2004-05 marketing year.  However, the focus on value added has also implied a shift 
away from basic cotton products.  According to the Turkish industry, its main challenges at present 
stem from high cotton prices caused by short supply and protective trade measures applied by cotton 
producing countries, high electricity prices by in ternational standards, and rising wage costs.
53   
60. Initiatives taken by the industry  include establishing a textile research and development centre 
in Istanbul, the Istanbul Fashion Academy, organi zing the Istanbul Fashion Week, and using stylist 
and designer competitions to stimulate new talent .  Many textiles and clothing companies have 
trademarked their own brands, and sought IPR prot ection for special designs.  World-famous branded 
goods are also produced for export in Turkey under licence from the foreign right holders.   
61. In 2010, Turkey ranked 5th among the world's exporters of apparel and 8th among the exporter 
of textiles.  Turkey is the second-largest supp lier to the EU market, which accounts for 80% of 
Turkey's exports of clothing.  In textiles, the principal export markets ar e the Russian Federation, 
Italy, Germany, Romania, and the United States.   
62. As shown in Table AIII.1, the textiles and clothi ng sector is subject to higher tariff protection 
than most other industrial activities.  Anti-dumping measures also affect the importation of yarn and 
textile fabrics (Table III.11).  In response to comp laints from domestic producers, an investigation 
was launched on 13 January 2011 regarding a possible increase in import duties on a broad range of 
textile and clothing accessories.  On 15 September 2011, Turkey began applying additional rates of 
duty ranging from 11% to 20% on textiles and 17% to 30% on clothing products within fixed ad 
valorem  limits expressed in US$/kg depending on the orig in (LDCs, developing, or other countries).  
Turkey does not have bound tariff rates for most of  the products subject to the additional duties.  
However, for goods with bound tariff rates, the duty increases are capped by the bound level.  The 
additional import duties are applied to all countri es, except the European Union and Turkey's free-
trade partners.  For goods shipped from third countr ies, Turkey takes into account their preferential 
origin under its GSP scheme.   
(4) SERVICES  
63. Although agriculture and manufacturing remain important, Turkey has become an economy 
dominated by services.  In terms of number of people employed, and excluding governmental services, the main sectors are wholesale and retail trade; transport, storage, and communication; real 
                                                      
53 According to the Turkish authorities, Turkey is now striving to increase its cotton production and 
attain a sustainable level of domestic production regardless of global prices and other exogenous factors.   Turkey WT/TPR/S/259 
 Page 97 
 
 
estate, renting, and business activities; constructi on; architecture; engineering; and hotels and 
restaurants.  The highest value added (per employee)  is in electricity, gas, and water supply.  The 
evolution of Turkey's foreign trade in services over the last five years is detailed in Tables IV.1 
and IV.2.   
Table IV.1 
Exports of commercial services, 2006-10 
(US$ million at current prices) 
 2006 2007 2008 2009 2010 
Commercial services (excluding government services) 25,275 28,624 34,783 33,195 33,878 
Transportation 4,972 6,541 7,793 7,825 9,026 
Sea transport 418 747 843 661 1,213 
Air transport 3,395 4,401 5,196 5,361 6,018 
Other transport (road transport) 1,159 1,393 1,754 1,803 1,795 
Travel 16,853 18,487 21,951 21,250 20,807 
Business travel 1,885 1,820 2,837 2,732 2,673 
Personal travel 14,968 16,667 19,114 18,518 18,134 
Other commercial services (commercial services - travel & transport) 3,450 3,596 5,039 4,120 4,045 
Communications services 416 506 725 633 463 
Construction (abroad) 936 856 1,146 1,279 1,120 
Insurance services 522 645 752 676 719 
Financial services 277 395 841 464 482 
Computer and information services 12 15 13 12 16 
Royalties and licence fees .. .. .. .. .. 
Other business services 289 208 338 282 333 
Personal, cultural and recreational services 998 971 1,224 774 912 
.. Not available. 
Source:  IMF BOP statistics. 
Table IV.2 
Imports of commercial services, 2006-10 
(US$ million at current prices) 
2006 2007 2008 2009 2010 
Commercial services (excluding government services) 10,800 14,608 16,694 15,600 18,309 
Transportation 4,662 6,966 7,984 6,535 8,291 
Sea transport 2,571 4,640 5,444 3,824 4,994 
Air transport 1,853 2,054 2,242 2353 2,833 
Other transport 238 272 298 358 464 
of which Road transport 201 237 261 333 420 
Travel 2,743 3,260 3,506 4,147 4,826 
Business travel 1,020 1,207 1,300 1,539 1,789 
Personal travel 1,723 2,053 2,206 2,608 3,037 
Other commercial services (commercial services - travel & transport) 3,395 4,382 5,204 4,918 5,192 
Communications services 299 305 298 247 246 
Construction (abroad) 57 97 172 189 261 
Insurance services 1,140 1,544 1,436 1,203 1,188 
Financial services 524 623 978 826 724 
Computer and information services 15 26 32 30 38 
Royalties and license fees  531 647 729  648 816 
Other business services 723 1,029 1,378 1,568 1,673 
Personal, cultural and recreational services 106 111 181 207 246 
Source:  IMF BOP statistics. WT/TPR/S/259 Trade Policy Review 
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64. Services are not covered by the customs uni on agreement between Turkey and the EU.  
However, in the context of Turkey's accession nego tiations, work has been initiated on alignment with 
the EU acquis  on the right of establishment and freedom to provide cross-border services.  The 
process will require Turkey's alignment with the EU  Directive on Services in the Internal Market, 
including the establishment of a Point of Single Cont act and competent authorities.  Turkey will need 
to amend some of its nationality and language requirements, and extend the scope for mutual 
recognition of professional qualifications.  Moreover,  Turkey's current requirements for the granting 
of work and residence permits to service provi ders established in EU member states are not 
compatible with the EU acquis . 
(i) Banking 
65. Turkey has 48 banks, including 31 deposit banks , 13 development and investment banks, and 
4 (Islamic) participation banks (as at September 2011).  Nine of these banks are state-owned, and 
23 are wholly owned by foreign banks, branches of foreign banks, or have majority stakes held by 
non-resident investors.54  At the end of June 2011, the assets of the Turkish banking sector totalled 
TL 1,146 billion, or the equivalent of 95% of Turkey's GDP.  The four largest banks are similar in 
size as their balance sheets each represen t 10-14% of the sector's total assets.   
66. Except for underwriting services, which may only be provided by development and 
investment banks, Turkish banks are universal banks.  Most insurance and leasing companies are either owned by, or affiliated with, the banks.  Ba nks may engage in equity intermediation through 
their subsidiaries.  Foreign and dom estic banks are subject to the same rules in terms of establishment, 
operation, and supervision.  Cro ss-border supply of banking services is not legally restricted.  The 
Turkish banking sector owned 38 fi nancial subsidiaries, 78 branch es, and 11 representation offices 
abroad as of December 2011.   
67. At the peak of its crisis, in November 2000 and February 2001, Turkey had a fragile banking 
system vulnerable to reversals in capital fl ows and a rising stock of non-performing loans.
55  Although 
action had been taken prior to the twin crisis, further measures were considered necessary.  The 
economic reform programme launched in May 2001 included measures specifically directed at the 
banking system, notably enhancing the powers of the Banking Regulation and Supervision Authority 
(BRSA), the strengthening of private banks, and rest ructuring of state-owned banks with the aim of 
privatization.56  The Savings Deposit Insurance Fund (SDIF) was given a key role in the protection of 
public rights and the management and disposal of assets of banks entering into administration or 
liquidation procedures (Box IV.1).  The overhaul of the Turkish banking system, including the 
restructuring of public banks, is estimated to ha ve cost the Government some US$53.6 billion.   
                                                      
54 Foreign banks have 41 representative offices in Turkey (as at September 2011).   
55 The banks' vulnerability was enhanced by a high public sector borrowing requirement, reliant on 
continuing demand for government securities, and rising interest rates under the Government's crawling-peg 
disinflation programme.   
56 The BRSA was established pursuant to the Banks Act No. 4389 in June 1999 and began operations 
in August 2000.   Turkey WT/TPR/S/259 
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Box IV.1 
Turkey's Savings Deposit Insurance Fund  
Established in 1983 to ensure deposits, and granted an additional role to strengthen and restructure banks (in 
1994), the SDIF originally reported to the Central Bank of Turkey.  The Banking Law adopted in 1999 
transferred the representation and administration of th e SDIF to the newly founded BRSA.  The SDIF became 
a separate legal entity in 2003.   
In all, 25 banks were taken over by the SDIF between 1994 and 2003.  The banks were resolved through 
merger, sale, or direct liquidation.  Among the 25 banks, 6 were under direct liquidation, 4 were sold directly, 
6 were disposed of through mergers, 1 was merged with a public bank, and 8 were transferred to the "Joint 
Fund Bank Inc.", which is limited to operations directly  related to asset liquidation as a "transition bank".   
The average settlement process for the banks taken ove r by the SDIF was 14 months, except for the 6 banks 
in the process of liquidation and the Joint Fund Bank In c.  The losses of the bank s transferred to the SDIF 
totalled US$23.2 billion, and the resources  transferred to the banks by the SDIF amounted to US$30.2 billion, 
including nearly US$6.6 billion in depositor compensation following the collapse of a major bank in 2003.  
The balance sheet of the Joint Fund Bank Inc. has been  scaled down significantly since 2006.  At the end of 
2009, the bank's loan portfolio had been reduced to TL 193 million, including TL 61 million in non-performing loans.  As of the end of  2010, the SDIF had collected US$19.7 billion from the resolved banks.  
 
The SDIF guarantees deposits up to TL 50,000 per customer (per bank) in lira, foreign currency or gold.  
Membership in the scheme is compulsory for all banks accepting deposits in Turkey.  The SDIF is funded by 
a risk-based premium collected quarte rly from the participating banks.  If necessary, the SDIF may also 
borrow government securities from the Treasury, receive advances fr om the Central Bank, or collect 
insurance premiums in advance.  At the end of 2010, the 36 member banks held deposits totalling 
US$401.5 billion, of which US$99.5 billion was insure d.  The SDIF reserve amounted to US$5.4 billion.   
Source:  BRSA (2010),  From Crisis to Financial Stability Turkey Experience,  Working Paper (Revised Third edition), 
3 September.  Viewed at:  http ://www.bddk.org.tr/WebSitesi /english/Reports/Working_P apers/8675from_crisis 
_to_financial_stability _turkey_experience_3rd_ed.pdf;  and the SDIF.  
68. The global financial crisis in 2008-09 led to a surge in non-performing loans in the Turkish 
banking sector, but no intervention w as needed to rescue individual banks.57  At the end of 
September 2011, the deposit, deve lopment and investment banks had non-performing loans totalling 
TL 17.3 billion, representing 2.8% of their total loans.58  At the same time , the banks had made 
specific provisions against loan losses totalling mo re than TL 14.2 billion.  The Turkish banking 
system reported an average return on equity of  18.1% in 2009, 16.4% in 2010, and 13.9% as 
of September 2011.  Only two banks recorded losses for the year 2010.   
69. The numbers of bank branches/offices and sta ff have been rising since 2003, reaching more 
than 10,000 branches/offices and 190, 000 employees in September 2011.59  Among the 7.8 million 
active users of internet banking services (as of September 2011), 90% are individual users and 10% 
                                                      
57 The guarantee of deposits was unlimited between 1994 and 2000, and the unlimited coverage was 
reintroduced during the crisis in 2001.  The present guaranteed amount (TL 50,000) has remained unchanged 
since 2003.  However, as a precautiona ry step, authority to determine the coverage and amount was transferred 
from the SDIF to the Council of Ministers in November 2008 for a period of two years.  Temporary relaxed 
rules on loan provisioning and restructuring were ended on 1 March 2011.   
58 Including participation banks, the ratio of non-pe rforming loans to total loans in the Turkish banking 
sector amounted to 3.6% in 2008, 5.2% in 2009, and 3.5% in 2010.  The rise in defaults and the subsequent 
recovery was particularly marked for credit cards and car loans.   
59 The closure and restructuring of Turkish banks in response to the earlier crisis had a profound effect 
on employment in the banking system, which fall from 175,000 in 2000 to 126,000 in 2002. WT/TPR/S/259 Trade Policy Review 
Page 100 
  
are corporate customers.  Almost 78 million deb it and 50 million credit cards have been issued 
(end-September 2011). 
70. The banking sector is regulated pursuant to Ba nking Law No. 5411, which entered into force 
on 1 November 2005, and Law No. 5464 on Bank Cards and Credit Cards.  The banking legislation 
was introduced and amended to align with the EU acquis  and to improve the administrative capacity 
for the effective implementation of new regulations . The BRSA has issued secondary legislation, such 
as regulations on the establishment and operatio n of banks, corporate governance, protective 
provisions, financial reporting, and non-bank fina ncial institutions, as well as communiqués on capital 
adequacy, financial reporting, and the operation of  branches of foreign banks established outside of 
Turkey.   
71. The BRSA became a member of the Basel Co mmittee on Banking Superv ision in May 2009, 
and of the Islamic Financial Services Board in De cember 2010.  Turkey is also a member of the 
Financial Stability Board.  The BRSA has begun im plementation of the Basel II rules, requesting 
banks to use these standards for reporting and review purposes during a transition period from 1 July 2011 until 30 June 2012.  However, the Basel II rules are not used to sanction non-compliance 
at this stage.   
72. A project to make Istanbul a regional and globa l financial centre was launched in 2009.  The 
centre would be fully integrated in Turkey's legisl ation and tax system.  The plan calls for upgrading 
Turkey's legal system, increasing the diversity of financial products and services, a simple and more effective tax system, an improved regulatory and supervisory framework, and a stronger physical and 
technological infrastructure.  Nine working groups ha ve been established pursuant to the Strategy and 
Action Plan.
60  In response to these plans, banks located  in Ankara have begun the process of moving 
their headquarters to Istanbul.   
(ii) Telecommunications 
73. The Electronic Communications Law No. 5809, which entered into force on 
10 November 2008, provides the legal basis for the current regulatory framework for 
telecommunication services in Turkey.61  The Act updated Turkey's legislation in this area and 
brought it closer to the EU acquis , i.e. Directive 2002/21/EC of 7 March 2002 and the specific 
directives relating to access, authorization, universal service, and privacy.62  The Law designates the 
Ministry of Transport, Maritime and Communi cations and the Information and Communication 
Technologies Authority (ICTA) as the competent authorities in this sector.63   
74. The role of the Ministry is primarily to deve lop the general policy with respect to electronic 
communication services and to maintain an alternative communications network in case of emergency or natural disaster.  The ICTA (formerly the Tel ecommunications Authority) has been given a wide 
range of responsibilities spanning from granting author izations, supervision, and the elaboration of 
                                                      
60 See State Planning Organization (2009). 
61 The Law replaced the legal framework based on Telegram and Telephone Law No. 406 of 
21 February 1924, except for the provisions relating to authorization, which entered into force on 10 May 2009.  Law No. 5369 on universal services in electronic communi cation (of 2005) remains in force, as does Wireless 
Law No. 2813, although the title of the latter is now the Law on Establishment of ICTA. 
62 According to the European Commission, the Law is not fully aligned with the EU acquis , notably 
with respect to definitions and scope, authorization,  universal service obligations, retail tariff regulation, 
spectrum management, access and interconnection,  and market analysis (EU, 2011).   
63 The ICTA is a member of the Independent Regula tors Group (IRG) and participates in Body of 
European Regulators for Electronic Communications (BEREC) as an observer.   Turkey WT/TPR/S/259 
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secondary legislation on issues such as spect rum management, access and interconnection, 
numbering, number portability, tariffs , and consumer protection.   
75. Suppliers of electronic communications services require authorization from the ICTA.  If the 
service does not require allocation of scarce resour ces (such as frequency or satellite slots), the service 
is considered authorized upon notification to the IC TA.  When allocation of resources is required, the 
ICTA may grant a right of usage valid for up to 25 years.  Unless the number of rights has been 
limited, e.g. for reasons of efficiency, rights of usage are granted within 30 days from the date of 
application.  In addition to an annual administra tive fee, the Council of Mi nisters sets mi nimum right 
of usage fees based on proposals by the Ministry of Transport, Maritime and Communications taking 
into account suggestions from the ICTA.   
76. The pricing of electronic communication services is, in principle, determined by the operators 
themselves.64  However, the ICTA may intervene in the tariff setting of enterprises deemed to possess 
significant power in the relevant market.65  Further to its supervisory functions, the ICTA may impose 
monetary fines on enterprises found to be in breach of the legislation or the terms of its authorization 
or usage rights.  ICTA may also obligate an operator to accept requests from other operators for 
access or interconnection with its network.  As the powers of the ICTA and the Competition Authority 
overlap in the telecommunications sector, the Law aims at establishing a cooperative relationship 
between the two agencies.  To enhance their coor dination, the ICTA and the Competition Authority 
signed a protocol on 2 November 2011 to increase th e exchange of information, mutual cooperation, 
and collaboration between the agencies' experts.   
77. As at 31 October 2011, 558 authorizations have been granted to operators in the electronic 
communications market in Turkey.66  Since the abolition of Türk Telekom's monopoly rights on fixed 
line, domestic long-distance, and international telephony on 31 December 2003, 166 authorizations 
have been issued for fixed telephony services.  Ne vertheless, the incumbent Türk Telekom continues 
to dominate the market for fixed-line telephony, holding a 90-93% market share (measured by revenue) in mid-2011.  However, the number of fixe d-line subscribers has been  in steady decline over 
the years and currently totals around 15.5 million. 
78. Introduced in 1986, mobile telephony now dom inates over fixed-line calls and accounts for 
roughly 84% of the total traffic.
67  The nearly 64.8 million mobile subscriptions in Turkey are divided 
among three operators; Turkcell (34 million), Voda fone (17.8 million), and Avea (12.5 million).68  
After a long period of uninterrupted growth, the numbe r of mobile subscriptions decreased by nearly 
                                                      
64 In addition to value-added tax, all types of installation, transfer, and telecommunication services 
provided by mobile telephone operators are subject to a Special Communication Tax.  The tax rate is 5% for fixed-line and mobile internet services, 25% for other mobile communications services, and 15% for other 
fixed-line communications services.   
65 More generally, the Law also contains provisions regulating subscription contacts, i.e. minimum 
content, equal access to services, quality and transparen cy, and other consumer rights.  The ICTA has issued 
further regulations with resp ect to customer rights and the quality of services.   
66 The number of service providers may be lower as some services may not yet have been launched.   
67 Mobile calls rose from 20.3 billion minutes in 2 004 to 125.8 billion minutes in 2010.  Fixed-line 
calls declined from 65.2 to 23.6 billion minutes during the same period.   
68 Shares in Turkcell were floated in an initial public  offering in 2000.  Its principal shareholder at 
present is Turkcell Holding (51%), whilst 33.48% of the shares are tradeable on the stock exchange.  
Vodafone Group Plc acquired the mobile operator Telsim for US$4.5 billion at a public auction in 2005.  Avea is owned by Türk Telekom (81.13%) and Türkiye I ş Bankasi (14.03%).  In 2005, the Turkish Government sold 
55% of Türk Telekom to a consortium (Ojer Telekomünikasyon AS) at a public auction for US$6.55 billion.  
The Government shed another 15% of Türk Telekom in a public offering to local and foreign investors in 2008, raising an additional US$1.9 billion (see Chapter III(3)(viii)).   WT/TPR/S/259 Trade Policy Review 
Page 102 
  
10% from 2008 to early 2011.  The decline has been attributed to the introduction of number 
portability and flat-rate tariffs, leading to the can cellation of second mobile subscriptions.  At the 
same time, the operators have also seen a shift from pre-paid subscriptions to more lucrative post-paid 
tariff schemes.   
79. Turkey had approximately 28 million internet user s at the end of 2010, corresponding to some 
9 million internet subscriptions, primarily in the fo rm of fixed-line (xDSL), mobile broadband, and 
cable modem or fibre internet access.  As of Nove mber 2011, the ICTA had authorized 141 internet 
service providers by notification.  At end-June 2 011, TTNet (the fixed-line incumbent's subsidiary) 
held a 55.6% share of all broadband internet subscr iptions, including all types of broadband internet 
subscriptions via fixed-line, mobile, cable, fibre or other types of access.  However, competition is 
intensifying as mobile operators are offering m obile broadband services.  3G services were launched 
in July 2009, and 30.8 million mobile subscribers are 3G users. 
80. Türk Telekom and the three mobile operators  generated net sales worth TL 21.2 billion 
in 2010.  The revenue of the other operators am ounted to nearly TL 1.1 billion, including the 
combined income of smaller internet providers of TL 754 million.  Since 2006, Türk Telekom and 
Turkcell have each generated net profits in the orde r of TL 2-3 billion annuall y, while Vodafone and 
Avea are still operating at a loss.  In terms of empl oyment, two thirds of the 38,000 people working in 
the sector are employed by Türk Telekom, against 7,500 in the mobile operato rs, and 4,600 in other 
communication operators.   
(iii) Transport 
81. Turkey's transport policy falls within the scope of the Ministry of Transport, Maritime and 
Communications.  The Ministry carries out transport infrastructure operations and regulation of all modes of transport as well as the communications sector.  The Directorate General of Coastal Safety, the General Directorate of State Airports Author ity, the Turkish State Railways, and the General 
Directorate of Post and Telegraph Organizati on are related bodies of the Ministry; and the 
Information and Communication Technologies Author ity and TURKSAT A.S. are affiliated bodies.  
Under the Ninth Development Plan (2007-2013), Turkey aims, inter alia,  to create an efficient 
transport subsector, giving priority to environm ental aspects; and to increase traffic safety in all 
modes of transport.   
(a) Maritime transport 
82. Surrounded by sea on three sides, and with four  of its major industrial centres (Istanbul-Izmit, 
Izmir, Bursa, and Adana) located on or near the sea, it is not surprising that approximately 85% of 
Turkey's foreign trade is carried by maritime tran sport.  The volume of seaborne trade rose steadily 
between 2001 and 2008, to reach almost 225 million to nnes, but declined in 2009 due to a fall in 
import shipments of 12 million tonnes.  Turkish ports unloaded an additional 58 million tonnes of 
transit cargo in 2009, and a furt her 18 million tonnes of merchandi se was shipped between Turkish 
ports that year.
69   
83. Maritime activities are administered pur suant to Turkish Commercial Law No. 6762, 
Cabotage Law No. 815, Ports Law No. 618, and th e International Convention on Standards of 
Training, Certification and Watchkeeping for Seafar ers of 1978.  Turkey has a two-register system; 
the Turkish National Ship Registry and the Turkish International Ship Registry.  At the end of 2010, 
the Turkish merchant fleet registered in Turkey consisted of 701 ships (1,000 gross tonnes and over) 
                                                      
69 In 2010, Turkish ports handled 247 million tonnes of cargo, including 64 million tonnes of transit 
cargo.   Turkey WT/TPR/S/259 
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with a total capacity of 8.6 million deadweight tonnes (dwt).  In tonnage terms, more than 90% of this 
fleet is registered in the Turkish International Ship Registry.  However, including Turkish-owned 
ships bearing flags of convenience (e.g. Malta, th e Marshall Islands, Panama ), the Turkish-owned 
merchant fleet totals over 2,500 ships with a co mbined capacity of almost 19 million dwt.   
84. The National Ship Register is reserved for v essels owned by Turkish citizens and companies 
majority-owned (51% or more) by Turkish nationals .  First mates and masters of ships must be of 
Turkish nationality, but up to 40% of the officer s of ships engaged in international seaborne 
transportation (i.e. excluding cabotage) may be fo reign nationals.  Turkey's International Ship 
Register, established in 1999, is also open to ship s and yachts owned by foreign persons resident in 
Turkey and foreign-owned companies incorporated purs uant to Turkish legislation.  In addition to the 
special tax incentives offered through the internationa l register, flying the Turkish flag allows the 
vessels to perform cabotage operations in Turkish wa ters and a 10% price preference in bidding for 
the transport of public cargoes or strategic raw materials.70  Nevertheless, almost 80% of Turkey's 
seaborne foreign trade is performed by vessel s registered elsewhere in the world.   
85. In order to deal with congestion and inefficien cies at Turkish ports, the operational rights of 
13 public ports operated by the General Director ate of the Turkish Maritime Organization were 
privatized several years ago.  Turkey has also est ablished 36-year concessions for three of its major 
ports operated until recently by the Turkish State Railways (TCDD); Mersin (in 2007), Samsun (2010), and Bandirma (2010).  The privatization pr ocess of other ports owned by the TCDD (i.e. 
Derince, Iskenderun, Galataport, Izmir) is on-going.  In addition, a major port is under construction at 
Ҁandarli, and is expected to handle its first car go in 2013.  Plans to build  a 50-km canal west of 
Istanbul to alleviate traffic through the Bosporus straight are still at an early stage.   
86. At the end of 2009, Turkey had 65 shipyards and a further 60 shipyards were under 
construction.  The main shipyards are located in Tuzla and Yalova (east of Istanbul).  Turkey's 
shipyards were operating at less than 50% capacity during the recent crisis, and employment in the 
industry fell from 33,500 in August 2008 to 8,000 in January 2010.  However, the industry began to 
recover in 2011.  Turkey also has a thriving boat-b uilding industry, producing a full range of boats 
from skiffs to large (90 m+) yachts.  Turkey exporte d ships and yachts worth US$1.1 billion in 2010.   
(b) Road transport 
87. The Ministry of Transport, Maritime and Comm unications regulates road transport in Turkey, 
including road-safety issues and the conditions app lied to cargo operators, carrier agents, brokers, and 
warehouses.
71  Moreover, the Ministry establishes the qualifications, rights and duties of persons 
employed in the sector.  Road transport services are provided by private companies;  an operating 
licence issued by the Ministry is obligatory.  Cr oss-border transportation of  goods and passengers is 
subject to bilateral or multilateral agreements or perm its issued by the Council of Ministers.  Vehicles 
registered in a foreign country may not trans port goods or passengers between two points within 
Turkey.  Turkey's road transport fleet (45,000 ve hicles) is among the largest and most modern in 
Europe.  According to the authorities, transit quota limitations applied by partner countries continue to 
prevent the efficient use of Turkish trucks.   
                                                      
70 Pursuant to the Cabotage Law, merchant maritime transport and passenger services, pilotage, and all 
other port services may only be provided by Turkish-flag ships.  For further details regarding the incentives and 
privileges, see WTO (2003) and WTO (2007).   
71 Turkey became a party to the Eu ropean Agreement on the internatio nal carriage of dangerous goods 
by road (ADR) on 22 February 2010.  A regulation on transport of dangerous goods has entered into force.   WT/TPR/S/259 Trade Policy Review 
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88. The General Directorate of Highways is respons ible for the construction, maintenance, and 
operation of roads.  The road network of the Genera l Directorate of Highways consists of 2,236 km of 
motorways, 31,383 km of state roads, and 31,459 km of provincial roads.  The General Directorate 
also administers Turkey's toll plazas, collecting tolls manually or automatically on a number of roads 
and bridges.  Road transport is the preferred m ode of domestic transport, accounting for more than 
90% of the volume of both freight and passengers.72   
89. The General Directorate began a programme in 2003 to upgrade highways in Turkey from 
single to dual carriageway.  At present, 33% of the Turkish road network is dual carriageway.  Several 
major projects have been launched recently to u pgrade the road infrastructure further, including a 
420-km highway linking Istanbul and Izmir, the Nort h Marmara Motorway Project (including a third 
suspension bridge across the Istanbul strait), as  well as a tunnel under the Bosporus.  Private 
entrepreneurs are invited to tender for the project s, to be constructed on a build-operate-transfer 
(BOT) basis.  Planned motorway projects until 2023 total 5,550 km.  The intention is to finance many of these projects through private-public partnerships.   
(c) Rail transport 
90. The Turkish State Railways (TCDD) has a de jure  monopoly in providing rail passenger and 
freight transport services in Turkey.  The TCDD owns and operates the entire railway system.  The reorganization and restructuring of the loss-making TCDD has been a key area of reform under the Ninth Development Plan (2007-2013).  As noted ab ove, the management of several ports owned by 
TCDD have been turned into con cession agreements with private operators, and other ports are in the 
process of privatization.   
91. Turkey's railway system consists of 11,940 km of track.  Major investments have been 
undertaken in recent years to build high-speed lines between some of Tu rkey's major cities.  The high-
speed lines linking Ankara with Eskisehir and Kony a have opened, and further projects are either 
under construction or on the agenda.  The Turkish ra ilway system is connected to the networks of 
neighbouring countries via seven border crossings.  Completion of the Marmaray Project, a 76-km 
commuter railway and sub-sea rail tube crossing of the Bosporus straight, would allow Turkey to 
connect to the Trans-European Transport Networ k and potentially become a hub for railway freight 
between Europe, Central Asia, and the Middle East.   
92. Although ambitious targets have been set for 2 023, the contribution of Turkish railways in the 
transportation of passengers and freight is still modest.
73  Continuing investments in infrastructure and 
new rolling stock is designed to make rail travel a nd rail cargo more attractive.  Turkey is also 
planning to open the sector to competition, although  the infrastructure would remain state-owned.  
Draft legislation to reform the railway sector is curre ntly before the Ministry of Transport, Maritime 
and Communications.   
(d) Air transport 
93. The national flag-carrier Turkish Airlines, 49% state-owned, continues to dominate Turkey's 
air transport sector.  As of September 2011, Turk ish Airlines controlled a fleet of 177 aircraft, 
including six freight planes operated by its subsid iary Turkish Cargo.  Turkish Airlines formally 
joined the global Star Alliance in April 2008.  Pr ivate air carriers have been allowed to establish 
                                                      
72 The share of road transport in the carriage of Turkey's foreign trade has been around 10-12% in 
recent years.  
73 The share of rail transport in to tal transport is about 5% for freight and 2% for passengers.  Only 
around 1% of Turkey's foreign trade is carried by rail.   Turkey WT/TPR/S/259 
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since 1983.  In addition to Turkish Airlines, Turkey  currently has 19 air carriers, 4 of which (Onur 
Air, Pegasus Airlines, SunExpress, and AnadoluJet) opera te a fleet of 20 aircraft or more.  Low-cost 
carriers have gradually been incr easing their presence in Turkey.   
94. Turkey has a total of 67 airports, 47 of these are civil airports, of which 35 are open to 
international flights.  Several ne w regional airports are under constr uction.  The General Directorate 
of State Airports Authority (DHMI) is in charge of airport management and the provision of air navigation services throughout Turkey's airspace.  However, private enterprises have been granted 
concessions to run the terminal operations at some of Turkey's busiest airports (i.e. the Istanbul 
Atatürk Airport, Antalya, Esenboga (Ankara ), Izmir Adnan Menderes, and Dalaman). 
95. Airport access is regulated by the Turkish Ci vil Aviation Authority pursuant to the General 
and Aerodrome sections of the Turkish Aeronautical Information Publication,  while slot allocation 
has been the responsibility of the DHMI since May 2010.  Air carriers operating scheduled flights to 
Turkey are authorized on the basis of reciproc ity within the framework of bilateral aviation 
agreements.  Charter services are authorized on th e basis of reciprocity under the rules of the 
European Civil Aviation Commission.   Turkey has signed bilateral air transport agreements with 
121 partners.  Turkey concluded an Open Skies Ai r Transport Agreement with the United States in 
2000.  Since its last TPR, Turkey has concluded a bi lateral air transport agreement with Canada (in 
2009), and initialled a civil aviation agreement with  the EU (25 March 2010).  The new "horizontal" 
agreement does not replace existing bilateral agreem ents between Turkey and individual EU member 
states, but aligns them with EU law.
74   
(iv) Tourism 
96. Turkey is one of the world's major tourist destinations;  it ranked 7th in international tourist 
arrivals (28.6 million) in 2010, and 10th in receipts from tourism (US$20.8 billion).  It is targeting 
revenue of US$60 billion from 60 m illion tourist arrivals annually by 2023.  Whereas Turkey was 
widely regarded as a low-cost d estination in the early stages of the industry's development, it is 
increasingly focusing on the higher end of the market and all-year tourism.  As the bulk of Turkey's 
visitors from the EU, the Russian Federation, and Ukraine choose Turkey for their summer holidays, 
much of the industry has a distinct seasonal char acter.  Projects to extend the tourism season, 
particularly in the Antalya region, include invest ments in golf courses, health clinics, shopping, and 
entertainment facilities.  Istanbul maintains its impor tance as an international hub throughout the year.  
As a cultural centre and congress venue, Istanbul hosted nearly 7 million foreign visitors in 2010, and 
is expecting to host some 8 million visitors in 2011.   
97. Turkey is becoming a popular destination for h ealth tourism.  According to the Turkish 
Statistical Institute, 115,223 people visited Turk ey for medical purposes in 2010.  Since 2007, the 
Ministry of Culture and Tourism has been back ing initiatives to promote Turkey's spas, thermal 
waters, and health centres.  At present, Turkey  has about 270 spas and thermal springs, and some 
385 hotels offer spa and wellness facilities.  However,  as more than 1,300 thermal sources have been 
identified across Turkey, the thermal resources could cat er to a much larger number of visitors.  The 
Turkish Government is accordingly prepared to pr ovide funding for the promotion and development 
of existing and new sites.   
98. As Turkey has been the home of numerous civ ilizations in the past, the country has an 
estimated 20,000 monuments and sites of archaeological significance.  The Anatolia region also 
includes many holy sites of early Christianity and Judaism;  and religious and cultural tourism is 
                                                      
74 Notably, due to the large Turkish population living in Germany, the air transport agreement between 
the two countries is a de facto  open skies agreement.   WT/TPR/S/259 Trade Policy Review 
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being recognized as an area of significant potentia l.  Funds have been made available for  the 
restoration and preservation of some 150 historical assets across Turkey since 2007.   
99. Although a fairly new concept in Turkey, winter  tourism is being regarded as a potentially 
profitable industry in the mountainous and less developed provinces of Eastern Turkey.  Two existing 
ski resorts (Palandöken and Sarikamis) are popular  among ski tourists from the Russian Federation 
and other CIS countries.  However, as these part s of Turkey are sparsely populated, further 
development of winter tourism would not only requi re investment in ski lifts, ice rinks, snowboard 
ramps, toboggan trails, etc. but also in basic in frastructure such as airports, roads, and hotels.  
Mountaineering and adventure tourism is also bei ng considered as complementary activities to extend 
the tourist season.   
100. The Government provides a number of incen tives for investments in tourist facilities, 
including the allocation of public land on 49-year l eases, the provision of water and electricity at low 
rates, tax exemptions on imported goods, as we ll as exemptions from VAT and other taxes on 
purchases of local products.  Many tourism projects are being contemplated as public-private-sector 
partnerships, constructed on a build-operate-transfer or similar basis.   
(v) Construction 
101. The Turkish construction sector, originally domestically oriented and focused on the 
construction of residential prope rty, began its development in the 1980s as major infrastructure 
projects were being undertaken in Turkey in joint-ve ntures with foreign constructors.  At present, the 
industry provides employment for some 1.5 million people.  The sector spans from a large number of 
small, mostly family-owned businesses to some 150 la rge contractors working internationally.  The 
construction industry accounts for more than 5% of Tu rkey's GDP directly, but its indirect effects on 
the economy are thought to be significantly larger.  Turkey is among the world's top 12 manufacturers 
of building materials, such as cement, glass, steel, and ceramic tiles.   
102. Turkey has an estimated 200,000 contractors in the construction sector.  No licence is 
required to operate a construction company in Turk ey, except for construction licences granted by the 
Ministry of Environment and Urbanism for on-goi ng construction projects subject to Law No. 2886; 
construction works of institutions not subject to Law No. 4743; construction procurements of 
municipalities in the form of building with flat co mpensation, and the construction works of private 
cooperatives.  Pursuant to Regulation No. 27787 On  the Registry of Building Contractors, Field 
Supervisors and Licensed Craftsmen, all contract ors will need to obtain a competence number from 
1 January 2012 onwards.  The regulation also stipul ates that all projects subject to a construction 
permit must be built under the responsibility of a bu ilding contractor.  National building standards 
were tightened in the wake of the earthquake in 1999.   
103. Domestically, the performance of the construc tion sector mirrors closely the path of the 
overall economy, but with much higher volatility (Chart  IV.3).  After the crisis in 2001, the sector 
benefited from a stable investment climate and redu ced interest rates.  The demand for housing was 
also stimulated by the availability of long-term financing on attractive terms.75  The economic 
downturn in 2008-09 affected the sector severely, but the subsequent rebound has been similarly 
spectacular.  In commercia l real estate, a temporary oversuppl y of office and retail space in the 
Istanbul area appears to have disappeared rapidly wi th the renewed strength of the Turkish economy.  
                                                      
75 The volume of housing loans provided by the banking sector rose from €400 million in 2003 to 
€18 billion in 2008.  BRSA (2009).  Turkish banks require minimum 25% equity put up  by the homeowner in 
order to extend a mortgage loan (DEIK, 2011). Turkey WT/TPR/S/259 
 Page 107 
 
 
051015202530
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(b) International activity of Turkish contractors,  2001-10
Annual project value
US$ billion
Source: Turkish Contractors Association .-20-15-10-505101520
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
GDP growth rate (%) Construction sector growth rate (%)Chart IV.3
(a) Turkey's construction sector, 1999-2011
Per cent 
a
a                 First six months.
Source: Turkish Contractors Association online  information.  
http://www.tmb.org.tr/doc/Turk_Yurtdisi_Muteahhitlik_Hizmetleri_en.doc.
 WT/TPR/S/259 Trade Policy Review 
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104. Outside of Turkey, Turkish contractors have unde rtaken about 6,500 projects for a total value 
of US$205 billion over the last 40 years.  The annua l project volume has risen from US$2.4 billion in 
2001 and 2002 to exceed US$22 billion every year si nce 2006.  The internationally oriented segment 
of the Turkish construction industry has become increasingly diversified in terms of markets, 
products, and business models.  In 2010, Turkish contractors undertook 577 projects in 50 countries, 
ranging from infrastructure projects (roads, bridges,  tunnels), residential housing, sports facilities, 
energy projects, tourism establishments, etc.  Geographically, the Russian Federation, Libya, 
Turkmenistan, Kazakhstan, and Iraq have been th e leading markets, representing around 50% of the 
business volume.  
105. According to the Overseas Contracting Communication  (Communication 
No. TAU/2007/001), an "Overseas Contracting Certifi cate" valid for three years may be issued to 
overseas contractors within four categories:  (i) civil engineering structures, plants, maintenance, and repair works; (ii) industrial and technological manufacturing, installation, and assembly works; 
(iii) operation, management, and maintenance works;  and (iv) design, engineering, and consultancy 
works.  A "Temporary Overseas Contracting Certificate", granted for a maximum of one year (but 
renewable under certain conditions), may be provide d to natural and juridical persons who do not 
meet the value thresholds stipulated for such wo rks, but who are aiming to complete their overseas 
construction commitments.  Since 2003, contractor s have been provided 330 overseas contracting 
certificates and 526 temporary certificates.  
 
106. Some Turkish contractors have specialized in  the construction of particular types of 
infrastructure such as international airports, railways, and urban transport systems.76  Another trend 
has been a growing interest in direct investme nt and property management abroad among Turkish 
construction companies.  
 
                                                      
76 The companies are being classified by affiliated chambers of the Union of Chambers and 
Commodity Exchanges of Turkey according to EU NACE codes.   Turkey WT/TPR/S/259 
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