In recent years, there have been notable cases from around the globe where intellectual property rights were violated in free zones, mainly in the form of using them to transit counterfeit goods. These cases have helped bring to light the need to combat intellectual property theft and, more broadly, to keep organised crime out of free zones. In Turkey, the status of free zones has been clarified to ensure that World Trade Organisation (WTO) standards are being met on intellectual property, and a new law introduced in April means that the IP rights of international firms will be strictly upheld throughout the country.
A country’s upholding IP rights is an important concern for investors, as controlling the underlying IP is what allows them to be profitable and maintain their reputation and brand quality. It is especially important for free zones to clearly demonstrate that their special status does not mean they are exempt from global conventions on IP, and that they will address concerns related to counterfeiting, piracy, and other forms of IP infringement.
Strengthening an IP regime directly correlates to increased foreign direct investment. According to a report by the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (BASCAP), “a 1% increase in a country’s patent protection correlates to a 2.8% increase in FDI,” while “a 1% improvement in trademark and copyright protection increases FDI by 3.8% and 6.8%, respectively.”
As Turkey looks to attract greater FDI, one of the most important steps it will take is strengthening IP rights. In April a law was proposed to standardise IP rights and bring them up to the highest standard, particularly in the area of upholding trademarks. Turkey currently ranks #61 of 128 indexed countries in the International Property Rights Index, which places it ahead of regional competitors like Bulgaria (#66), Egypt (#128), and Ukraine (#115). Its aim, however, is to standardise with top upholders in the European Union and Schengen area, and shake off an outdated reputation for being lax on IP.
Improved IP would also address Turkey’s other major macroeconomic goals, and specifically the goals of free zones. According to BASCAP, strong IP rights are “increasingly being recognised as a significant contributor to a country’s economic development, technology transfer and increased innovation rates… ensuring growth in value of many industries, ensuring growth in value-added jobs and foreign trade.”
A BASCAP report on free trade zones found that Turkish “customs and judicial authorities have clearly indicated that they have jurisdiction and authority in FTZs and that IPR abuse will not be tolerated.” This clarification, along with the new anticipated legislation, should have a positive aggregate effect on Turkey’s ability to attract top-flight foreign investors.