Strong efforts to protect the lira while keeping the economy healthy and vibrant in a time of global turmoil and uncertainty is the name of the game in Turkey, according to Guleryuz Partners Partner Zahide Altunbas Sancak.
“The overall financial situation and the depreciation of the Turkish lira have led to a number of legislative updates seeking to protect it,” Altunbas Sancak begins. “The financial situation directly impacts the political climate – of course, the reasons for this are many: the global crisis, rising inflation, and supply chain issues, to name but a few,” she says. “The Turkish government has instituted a number of protection measures for keeping the lira healthy, including implementing currency appreciation controls until the end of this year,” she explains.
“Furthermore, there were credit restrictions imposed on borrowing in Turkish lira – if a company is holding more than TRY 15 million in foreign currency, it can no longer borrow in lira.” According to Altunbas Sancak, the idea of this control is “to prevent foreign currency speculation,” but she argues that the regulation “threads dangerously closely to capital control measures.” Additionally, the current status of the financial ecosystem in Turkey is influenced by the upcoming elections that should normally take place next year but are expected to happen sooner, in the face of opposition pressure. However, “no official communications have been made yet as to when they will occur.”
Altunbas Sancak also reports there has been a legislative update regulating assets. “Now, if unregistered assets are brought into the country, for example, money – it can be registered with a bank with a minimal tax burden without any inquiries made by the bank concerning the source,” she says. This measure, applicable until March 2023, seeks to encourage people to “introduce foreign assets into the local economy.”
Moreover, the war in Ukraine, the EU and US Russia-sanctions-related fallout, and the increase in e-commerce sector volume have led to “more regulatory updates to the Turkish ecosystem,” Altunbas Sancak explains. “As for the ongoing war in Ukraine and its impact on Turkey – the country had previously been acting and will continue to act as a trade corridor of sorts between Russia and western countries,” she says. The war has no doubt disrupted trade in the area, and “some legislative measures have been announced on the restriction of certain exports, such as some food items”, she adds, stressing that there has been a surge of client inquiries related to the war and, “especially, on Turkish multinational companies’ standing on US and EU sanctions.”
Finally, Altunbas Sancak says that the “legislator has started to take action with regulating the rapidly growing e-commerce sector. The government is attempting to implement a new competition framework for intermediate service providers, as well as vendors – there will be licensing requirements which will differentiate between the size of these platforms,” she explains. “Some of these changes will take hold by the end of the year, while others will be implemented by 2024 and 2025 – although we have already started receiving client inquiries,” Altunbas Sancak concludes.