Staying ahead of the crisis in Turkey

14-09-2018
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Author:
Bierens
1 min.

Doing business in Turkey? Proceed with caution. Since the attempted military coup in 2016 the economy has taken a hit and Turkey’s government is making sweeping changes to its political, legal, and economic systems.

Turkish Economy

One of the current market concerns in Turkey is foreign debt held by the private sector. The debt grew to $245 billion by the end of April 2018. Of that amount $18.6 billion must be paid within 12 months. In addition to rising foreign debt, political instability has affected market health and investor confidence.

Many analysts are questioning Turkey’s market stability, however the current government is resisting attempts at market correction. Despite pressure from the financial sector, President Erdogan will not approve a rise to the interest rate and blames foreign governments for the economic downturn. The Lira has also dropped in value against the Dollar and inflation is at its highest point in 15 years.

While producers would normally move to pass rising costs onto consumers, the high rate of inflation has consumers buying less.  The government has also raised energy costs and increased the tax rate on deposits of foreign currency. Local producers are now facing higher operating costs and lower profits.

For more information on Turkey and all of the Europe, please contact us at europeancollections@bierensgroup.com or call us on +44 (0)20 3808 5878

Tips to reduce your credit risk in Turkey

  1. Get paid in advance. If that’s not possible, ask for security – i.e. a Letter of Guarantee.
  1. Do not accept promissory notes or cheques! Letters of Credit are a more secure option.
  1. Keep up to date on your customer. The market is unstable and things can change quickly. Official credit reports and trade registry records are valuable sources of information.
  1. Make sure you come to clear agreements on terms of payment. The commercial terms of sale are 60-120 days in Turkey.
  1. Have signed agreements with your trade partner and take care that general terms and conditions are also signed.
  1. If there is a contract dispute, choose Turkey as the competent court of jurisdiction. Not all foreign judgments are always recognized or enforced by Turkish courts.
  1. For transactions over $150,000 include an arbitration clause. Turkey is a member of the New York Convention, which means arbitration will be effective in any arbitration court worldwide.

Latest Important Events:

  • In the Turkish Parliamentary election last June, Erdogan won the presidency and became the first President of the new system in Turkey.
  • In July 2018 the ‘State of Emergency’ was lifted and Erdogan's government has since obtained much more power.
  • President Erdogan will now control a government that has no prime minister and reduces the role of parliament. He and his party control judicial appointments and can legislate by decree.