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PESTLE analysis
Political analysis
Overview
Turkey has been a strong promoter of liberal trade and investment policies and the recent governments have shown a sustained commitment to focus on improving economic policies. Turkey became a candidate for EU membership at the Helsinki Summit in 1999. Nevertheless, increasing corruption and a perceived lack of political commitment continue to discourage prospective international investors.
Source: Datamonitor
DATAMONITOR
PESTLE analysis
Most of the terrorist organizations in Turkey have targeted foreign tourists or assets in the country. Since 2004, the Kurdistan Workers Party (PKK) has been working to damage the Turkish tourism industry by targeting foreign tourists. Over the years, radical Turkish Islamists have plotted several attacks in Turkey, the majority of which have been prevented. The intention behind these schemes has been to hamper the foreign interests in the country, including institutions, businesses and personnel associated with the US and the UK. These repeated terrorist attempts will inevitably increase the security risk in the country and hamper its growth prospects.
PESTLE analysis
Economic analysis
Overview
The economic structure of Turkey is well supported by the fiscal and monetary policies of the government. Moreover, the healthy flow of FDI into the country is boosting its economic development. The Turkish government also plans to implement free trade agreements (FTAs) with the intention of encouraging foreign and domestic investors and thereby improving competitiveness. Despite recent initiatives, such as the easing of overtime restrictions, the Turkish labor market remains relatively rigid compared to international standards.
Current strengths High inflow of foreign investment Prudent fiscal and monetary policies
Source: Datamonitor
DATAMONITOR
PESTLE analysis
PESTLE analysis
Social analysis
Overview
Turkey has been grappling with the problems of high unemployment levels and the lack of a proper educational system. Turkeys infant mortality rate is six to seven times higher than that of the members of the EU. The government has initiated programs for fiscal sustainability, and reforms are expected to be undertaken in the areas of healthcare and the pension system. Some of the most important social welfare schemes that the government has been providing are unemployment insurance, medical insurance, insurance for work-related injuries, maternity insurance and housing security. The system is financed primarily by contributions made by employers and through the payroll deductions of employees. With the recent reforms in the education system, it can be expected that the tertiary education scenario will improve and the growing mismatch between academic and industrial needs will be rectified.
Current challenges Low human development index Increasing infant mortality High level of unemployment
Future risks Ineffective social security system Inadequate education system and infrastructure
Source: Datamonitor
DATAMONITOR
PESTLE analysis
68.7%. Turkey also fares low in terms of gender equality. Turkeys gender-related development index (GDI) value is 0.763. GDI measures achievements by using the HDI indicators, but captures also inequalities in achievements between women and men. The index indicates Turkeys inability to create a positive social climate for women.
PESTLE analysis
PESTLE analysis
Technological analysis
Overview
Turkey has been slower in adopting technological advances than the EU countries, although policy measures have been undertaken to expedite this. Total expenditure on R&D in 2006 as a percentage of GDP was 0.6%, compared to 2.3% in the OECD countries. Nevertheless, over the past decade, Turkeys telecommunications industry has been booming due to the liberalization of the market. The number of mobile telephone subscribers increased at a CAGR of 22%, from approximately 23 million in 2002 to 62 million in 2007. However, the levels of patenting remain extremely low, despite a rapid increase in recent years. The R&D climate is expected to improve, as the government has been taking several initiatives towards developing the technological landscape of the country by encouraging foreign entities, prominent universities and research organizations to foster a culture of innovation.
Future prospects Government encouragement to improve R&D Prospects of joining the EU reversing brain drain
Source: Datamonitor
DATAMONITOR
PESTLE analysis
PESTLE analysis
Table 7: Patents received from the US Patent and Trademark Office by country
Year Turkey France Germany Japan US
6 14 18 32 19 10 23
Source: Datamonitor
PESTLE analysis
Legal analysis
Overview
Turkey has an independent judicial system responsible for the maintenance of law and order. The Constitutional Court, the highest constitutional body in Turkey with respect to legislation, determines the constitutionality of legislation prior to the enactment of new laws. The judicial system is divided into the judicial and administrative orders of courts, and a clear hierarchy of courts at different levels of states and center exists. The government has been trying to make Turkey an attractive destination for investment by encouraging more infrastructure investment, which contributes significantly to the economic growth of the countrys economy through diffusion of technology, positive externalities and capital inflows. Along with this, the government has reduced the basic rate of corporation tax, with the intention of drawing FDI in Turkey. However, there exist a lot of loopholes available for those looking to evade the tax system, which is leading to huge revenue losses for the government.
Current strengths Comprehensive legal structure Robust framework for business entities Future prospects Reduction in tax rates Favorable laws for foreign investment
Source: Datamonitor
DATAMONITOR
PESTLE analysis
more than the world average of 19 procedures but less than the world average of 234 days, with costs relatively low. The robust framework for business entities hence creates a successful commercial environment and drives business growth in Turkey.
PESTLE analysis
PESTLE analysis
Environmental analysis
Overview
Turkey has been a leader with respect to environmental legislation and ranks ninth in terms of biodiversity compared to other European countries, with over 33% of its flora being endemic. The country is strongly involved in global environmental issues and has linked its development aid to environmental objectives and policies focusing on air pollution, biodiversity, chemical substances, environmental health, and global issues such as climate change. Despite the presence of a strong framework, environmental pollution in Turkey is high due to an increase in the amount of chemicals and detergents being dumped. There has also been a rise in air pollution, particularly in urban areas.
Source: Datamonitor
DATAMONITOR