Turkey has three decades of experience utilising free trade zones to meet economic needs such as boosting exports, building bases of local expertise, and providing employment to its young people. Turkey’s 19 Free Trade Zones, which Mersin Free Zone CEO Edvar Mum describes as “secret locomotives of the Turkish economy,” together access four seas: the Mediterranean in the south, Aegean in the west, Marmara in the northwest, and Black in the north. As of Q2 2015 they hosted a total of 2126 companies, of which 504 were foreign, and in 2014 their total trade volume reached $22.5 billion USD, up from $8 billion in 2001.
Turkey’s FTZs have had a 120:1 ratio of private to public investment, meaning the FTZs have driven significant economic growth without requiring heavy expenditures of public capital. This growth has been built upon the incorporation of free zones in key geographic locations and already-existing industrial centers; regionally competitive land, facility, and services costs; and a tax framework that includes corporate, income, and value-added tax exemptions.
As Turkey’s foundational free zones, such as Mersin and Antalya, get set to renew their leases after thirty years in operation, all of its free zones are united in seeking a strong government commitment to the model. Free zones are eagerly awaiting the approval of an amendment to Free Zone Law 3218, which was prepared and sent to Turkey’s Grand National Assembly in 2015 with the aim of improving free zones’ incentives base and clarifying their long-term status as pillars of the Turkish economy.
Turkey’s free zones have proven a success in sustaining the manufacture and export of light and heavy industrial goods, as well as fostering buoyant niche industries such as yacht building in Antalya. Continued production stability and expansion into fields as diverse as petrochemicals, medical technologies, high tech, and financial services, will be the key for Turkey to take the next step as a global leader in the free zone model.
At a glance
- $20+ billion USD annual trade volume
- 1622 local companies / 504 foreign companies
- 120:1 private-to-public investment ratio
- 60,000+ employees
- Exports account for more than 54% of trade flows
The advantages of doing business in Turkey’s free zones
Turkey’s free zones offer a competitive blend of customs incentives, geographic position and logistics savvy, low utility costs, and skilled labour.
Turkey sits in a unique position as a crossroads between large markets, having strong political and trade relations with the key players in those markets. For example, when looking at Turkey’s relation to the European Union, one sees well-established trade ties and increasing logistics and customs integration. At the same time, setting up in a Turkish free zone offers attractive skilled and unskilled labour at a very competitive cost relative to the big economies of the EU, as well as tax incentives, economic utilities, and strong supply chain integration in support of industry, from raw materials to value-added exports.
Unlike special economic zones in emerging economies in regions like Southeast Asia, Central Africa, and Central America, Turkey has the benefit of a highly-educated labour force that is nonetheless cost-effective. This means that Turkey’s free zones are not mere vessels for assembly and other processes requiring cheap and unskilled labour, but dynamic organisations that can train up local labour and bring in highly-educated professionals to facilitate high value-added operations in high-tech industries. Couple this with the low cost of industrial electricity, natural gas, water, and wastewater compared with countries like Germany, France, and the United Kingdom, and it is easy to see why Turkey’s free zones are naturally suited for EU-bound exports.
Turkey also boasts the potential for multinational companies to build backward linkages, with strong traditional iron and steel sectors, more than $7 billion USD in annual exports of fruits, vegetables, meats, and other agricultural products, and all the inputs necessary for textile production and other light industries. The northwest (Thrace, Istanbul, Kocaeli, and Bursa) are a hub of automotive and textile production, while coastal cities have strong traditional trade links with Mediterranean and Aegean seaports, North Africa, and the Middle East. Turkey’s trade with the Far East is also growing, and a number of Chinese and Japanese firms have invested in Turkish free zones recently. The banking and tourism sectors have also traditionally been robust, and tourism, medical tourism, and financial services are likely to be among the next frontier of Turkey’s free zones.
Comprehensive list of incentives to invest in Turkey’s free zones
- 100% exemption from customs duties and other assorted duties.
- 100% exemption from corporate income tax for manufacturing companies.
- 100% exemption from value-added tax (VAT) and special consumption tax.
- 100% exemption from stamp duty for applicable documents.
- 100% exemption from income tax on employees’ wages (for companies that export at least 85% of the FOB value of the goods they produce in the free zones).
- Goods can remain in free zones for an unlimited period. Companies are free to transfer profits from free zones to abroad as well as to Turkey, without restrictions.