Turkey in Doing Business 2009

Turkey reached the 59^th rank among 181 countries in the World Bank Group’s Ease of Doing Business rankings, up one rank from 60^th place last year, after an increase by 34 ranks the year before.

The last two Doing Business reports recognized Turkey for the implementation of measures to streamline the regulatory environment and reduce the burden of regulation on economic activity, which is key for improving the investment climate and sustaining private sector growth and employment.

Specifically, the reports have recognized the progress achieved in the areas of: protecting investors (increased disclosure of related party transactions); paying taxes (corporate income tax cuts; introduction of e-filing; and the simplification of nuance taxes); and trading across borders (introduction of electronic customs procedures; and signing of border cooperation agreements). Moreover, recently introduced labor market reforms (reductions in nonwage labor costs) were reflected in a significant improvement in the difficulty of hiring index (part of the employing workers indicator) for 2008, which went from 56 to 44 as of the last report.

The reports also shed light on policy areas where future reforms will be especially important.  Specifically, Turkish business continue to face serious constraints in
dealing with licenses and permits, employing workers, and closing a business. For example, it still takes 188 days and 25 procedures to obtain an operating license in Turkey; similarly, firing costs remain exceptionally high at the equivalent of 95 weeks of salary; finally, exiting the market takes longer and yields lower recovery rates than in comparator countries. The burden of regulations in these areas is likely play a major role behind the high level of informality in Turkey. Informal firms typically grow more slowly, have poorer access to credit and employ fewer workers—and their workers remain outside the protections of the law.

The Government of Turkey is in the process of addressing business environment constraints to firms' growth and job creation. Key steps will include the implementation of measures to reduce licensing costs and make the labor market more flexible, and the passage of a new Commercial Code. The World Bank is working closely with the Turkish authorities in these areas under Turkey's Country Partnership Strategy with the World Bank. For example, the Bank provides support for these reforms through the Competitiveness and Employment Development Loan (CEDPL) series, and also extends financing through credit lines to exporters and small and medium enterprises.

Doing Business 2009 is the sixth in a series of annual reports issued by the World Bank Group assessing the role of regulatory frameworks in enhancing or constraining business activity. The report highlights the importance of a strong private sector business environment for helping generate economic growth and jobs. The main objectives of Doing Business are to provide international benchmarking as a service to policymakers and private sector stakeholders alike, to motivate and inform the design of reforms, contribute to the theory and experts’ and practitioners’’ understanding of private sector development, and to enrich international initiatives on development effectiveness.

The Doing Business report provides a quantitative measure of the impact of regulations, based indicators in 10 key areas: starting a business, dealing with construction permits, employing workers, transferring property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. Performance against these indicators serves to rank countries on the basis of the quality of their regulatory environment and to identify top reformers over the last year.

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